A compound interest calculator is a tool that helps individuals determine how much money they can earn on an investment over time. It calculates interest based on the initial principal and the accumulated interest from previous periods. This means that interest is earned on both the original amount and the interest that has already been added, leading to exponential growth. These calculators typically require inputs such as the principal amount, interest rate, and the number of compounding periods per year. By adjusting these variables, users can see how different scenarios affect their potential earnings, making it easier to plan for future financial goals.