Compound Interest Calculator
See how your money grows with compound interest. Enter a starting amount, monthly contributions, rate, and time to project the future balance.
Compound interest earns returns on both your principal and previously earned interest. Estimates assume a constant rate; real returns vary.
How to use this calculator
Enter your starting principal (an initial lump sum — can be zero), an optional monthly contribution, the expected annual interest rate, the number of years to grow, and the compounding frequency (monthly is the most common for savings accounts and many investments). The calculator shows:
- The projected future balance
- Total amount you contributed (principal + all deposits)
- Total interest earned through compounding
- A year-by-year growth chart so you can see the curve steepen over time
To see the effect of any single variable, change one input at a time. Try doubling the time horizon, or halving the monthly contribution, to build intuition about what drives the result most.
How compound interest works
With simple interest, you earn a fixed amount each period based only on the original principal. With compound interest, the interest earned each period is added to your balance, and the next period's interest is calculated on that larger amount. This "interest on interest" creates a feedback loop: as the balance grows, each period's interest is larger, which makes the balance grow faster, which makes the next period's interest larger still.
The effect is modest in the first few years and dramatic over decades. This is why the growth curve in the chart is relatively flat early and steep late — and why starting early is so much more valuable than starting with a larger amount later.
Compounding frequency determines how often interest is calculated and added to the balance. Daily compounding produces slightly more than monthly, which produces slightly more than annual. For most purposes, the difference between daily and monthly is small — the rate and time horizon are far more influential.
The formula
A = P(1 + r/n)nt
Where A = future value, P = principal, r = annual rate (decimal), n = compounding periods per year, t = years.
When regular contributions are added, the future value of each contribution is calculated individually — each one compounds for its own remaining time. The sum of all these future values, plus the compounded lump sum, gives the total projected balance.
Worked example — step by step
You start with $10,000, contribute $200 per month, expect a 7% annual rate compounded monthly, over 20 years.
- Monthly rate: 7% ÷ 12 ≈ 0.5833%
- Lump sum growth: $10,000 × (1 + 0.005833)^240 ≈ $40,100
- Future value of monthly contributions: approximately $104,000
- Total projected balance: approximately $144,000
- Total contributed: $10,000 + ($200 × 240 months) = $58,000
- Total interest earned: approximately $86,000
Notice that interest earned (~$86,000) substantially exceeds total contributions (~$58,000). That ratio improves further with more time: run the same scenario for 30 years and the interest portion dwarfs contributions even more dramatically.
How to interpret your results
The future balance is a projection, not a guarantee. It assumes a constant return rate, regular contributions made exactly on schedule, and no withdrawals. Real investments fluctuate — this calculator is most useful as a planning tool for understanding the long-run power of compounding, not as a precise prediction.
Pay attention to the interest earned figure relative to your total contributions. In the early years, contributions dominate. Over a long horizon, the interest portion overtakes contributions — which is the fundamental argument for starting to save and invest as early as possible.
The calculator shows nominal values. For a rough inflation-adjusted estimate, reduce the annual rate input by an assumed inflation rate (for example, subtract 3% from a 7% expected return to use 4% as the "real" rate).
Common mistakes to avoid
- Confusing APR and APY. Banks typically advertise APY (which includes compounding) on savings accounts and APR (which doesn't) on loans. Use APY when projecting savings growth for an accurate result.
- Using a rate that is too optimistic. Higher assumed rates produce much larger projected balances. Use realistic, conservative estimates — especially for long horizons — so your projections don't overpromise.
- Ignoring taxes on investment gains. In taxable accounts, interest and capital gains may be taxed each year, reducing the effective compounding rate. Tax-advantaged accounts (401(k), IRA) defer or eliminate this drag. The calculator does not account for taxes.
- Waiting to start. Delaying by even a few years can cost a surprising amount due to the exponential nature of compounding. Run the same scenario with a start date 5 years later to see how much the final balance falls.
- Stopping contributions during market downturns. Consistent contributions during downturns buy more units at lower prices — a benefit of dollar-cost averaging. Stopping contributions breaks the compounding chain and often happens at the worst time.
Projections are estimates for educational purposes and are not a guarantee of future results. Investment returns vary and are not guaranteed. This is not investment or financial advice.
How we calculate this
For the lump-sum portion, the calculator applies A = P(1 + r/n)^(nt), where r is the annual rate, n is compounding periods per year, and t is years. For monthly contributions, each contribution is treated as a future value of an annuity and compounded for its remaining time horizon. The two results are summed to produce the projected total balance. Results are estimates and assume a constant rate with no withdrawals.
Sources
Frequently asked questions
What is compound interest?
Compound interest is interest calculated on both the original principal and the interest already accumulated. Each period, interest is added to the balance, so the next period earns interest on a larger base. This 'interest on interest' effect causes balances to grow exponentially over time rather than linearly the way simple interest does.
What is the compound interest formula?
For a lump sum without contributions: A = P(1 + r/n)^(nt), where P is the starting principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the number of years. When regular contributions are added each period, the future value of those contributions is calculated separately and added to the lump-sum result.
How does compounding frequency affect growth?
More frequent compounding means interest is added to the balance sooner, so it starts earning returns earlier. Daily compounding earns slightly more than monthly, which earns slightly more than annual. The difference is modest at low rates but becomes meaningful over long periods or at high rates. For most savings accounts and investments, monthly or daily compounding is standard.
Why do regular monthly contributions matter so much?
Each contribution you make has its own time horizon to compound. A $200 monthly contribution made in year 1 has decades to grow, while contributions made later have less time — but together they can dwarf the starting principal over long periods. Consistent contributions combined with compounding are the core mechanism behind most long-term wealth building.
What is the Rule of 72?
The Rule of 72 is a quick mental math shortcut: divide 72 by the annual interest rate to estimate how many years it takes to double your money at compound interest. At 6%, 72 ÷ 6 = 12 years to double. At 8%, it's about 9 years. It's an approximation, but a useful one for quick comparisons.
What is the difference between APY and APR?
APR (Annual Percentage Rate) is the stated interest rate before the effect of compounding. APY (Annual Percentage Yield) reflects the actual return after compounding within the year. A 6% APR compounded monthly produces an APY of about 6.17%. When comparing savings accounts, use APY for an apples-to-apples comparison.
Does this calculator account for inflation?
No. The results show nominal future value — the raw dollar amount — without adjusting for inflation. To estimate real (inflation-adjusted) purchasing power, you can subtract an assumed inflation rate from your expected return rate and use that lower figure as the input rate. For example, if you expect 7% returns and 3% inflation, use 4% as your real rate.
Why does starting early matter so much more than the rate?
Time is the most powerful variable in the compound interest formula because it appears as an exponent. Adding even a few extra years to the compounding horizon has a larger impact on the final balance than improving the rate by several percentage points. A 25-year-old who starts saving has decades more compounding time than someone who starts at 40, which can translate to a dramatically larger final balance even with identical contribution amounts.