Compound Interest Calculator
Enter your starting balance, monthly contribution, interest rate and time horizon to see exactly how much your money grows with compounding — year by year.
How compound interest works
Compound interest is interest earned on your interest. With simple interest, a $10,000 deposit at 5% pays $500 every year, forever. With compound interest, year two pays interest on $10,500, year three on $11,025, and so on. The gap starts small and widens dramatically — after 30 years, the compounded balance is more than $43,000 while the simple-interest balance is just $25,000.
The formula this calculator uses is the standard future value equation:
Where P is your initial deposit, r is the annual rate, n is compounding periods per year, t is years, and PMT is your monthly contribution. Rather than solving that in one shot, this calculator simulates month by month — each period the balance earns the periodic rate, then your contribution is added. This matches how banks and brokerages actually credit interest and deposits, so the result is a realistic projection rather than a textbook approximation.
Three levers that change everything
1. Time beats rate
Compare two savers: Alex invests $500/month from age 25 to 35, then stops. Ben invests $500/month from 35 to 65 — three times as many years of contributions. At 7% annual return, Alex still ends up with more money at 65. The extra decade of compounding on early contributions outweighs Ben's twenty extra years of deposits. This is why starting early is the single most powerful move in personal finance.
2. Small rate increases compound too
Moving from a 1% savings account to a 4% high-yield account doesn't just quadruple your interest — it more than quadruples your long-term balance, because every dollar of extra interest starts earning interest itself. On $10,000 left alone for 20 years, that difference is roughly $12,200 versus $21,900.
3. Contributions matter early, growth matters late
In the first decade of a long plan, most of your balance growth comes from what you deposit. By year 20 or 25, the majority of new growth typically comes from interest on interest. Run the calculator with a 0% rate and then with your expected rate — the difference between the two tables shows exactly when compounding takes over.
Frequently asked questions
What is compound interest?
Interest earned on both your original principal and on previously earned interest. Over long periods this "interest on interest" effect can more than double your growth compared to simple interest.
Does compounding frequency matter?
Yes, but less than rate and time. Going from annual to monthly compounding on a 5% rate adds roughly 0.12 percentage points of effective annual yield. Time in the market matters far more.
What is the Rule of 72?
A quick shortcut: divide 72 by your annual return rate to estimate the years needed for money to double. At 6% per year, money doubles roughly every 12 years.
Are investment returns guaranteed like savings interest?
No. Savings accounts and CDs pay contractual interest. Stock market returns fluctuate year to year and can be negative — the rate you enter here is an assumption, not a promise.