How compound interest works
Compound interest means you earn interest on your interest. Each period, the interest earned is added to the balance, and the next period’s interest is calculated on the larger amount. Over short periods the effect is small; over decades it becomes the main driver of growth.
This calculator turns your annual rate into the equivalent monthly rate for the compounding you choose, then adds your contribution each month. The year-by-year table shows how the split between what you paid in and what you earned shifts over time.
What matters most
Time and the rate dominate. Starting ten years earlier usually beats saving noticeably more later, because early money has longer to compound. Try the same monthly contribution over 20 and 30 years to see the gap.
Fees matter too. A 1% yearly fee on an investment reduces the effective rate you enter here, so subtract it from the expected return for a realistic picture.
Using the results
Treat the output as a projection, not a promise. Real investments rise and fall, and savings rates change. For planning, run a cautious rate and an optimistic one and see how wide the range is.
Questions people ask
What is the compound interest formula?
For a lump sum, A = P(1 + r/n)^(n·t), where P is the starting amount, r the annual rate, n the number of compounding periods per year and t the years. With regular deposits, each deposit also grows for the time it stays invested; this calculator adds them month by month.
Does compounding more often make a big difference?
Less than most people expect. At 5% for 10 years, $10,000 grows to $16,289 compounded yearly and $16,470 monthly. Daily compounding adds only a little more. The rate and the time matter far more than the frequency.
When are monthly contributions added?
At the end of each month, after that month’s interest. Depositing at the start of the month would earn slightly more, so treat the result as a cautious estimate.
Does this include inflation or taxes?
No. The result is a nominal figure before tax and before the rising cost of living. Use the inflation calculator to see what the final balance could buy in today’s money.
Can I use it for debt as well as savings?
The same maths describes interest growing on a debt that is not being repaid. For a loan you are paying down, use the loan calculator instead, which accounts for your payments.