Finance

Compound Interest Calculator

See how your savings grow over time with compound interest. Adjust your deposit, contributions, and rate to visualize your wealth trajectory.

Quick Answer

Compound interest is calculated using the formula A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding frequency, and t is time in years. At a 7% annual return compounded monthly with $500/month contributions, $10,000 grows to approximately $262,000 in 20 years. More frequent compounding (daily vs. annually) yields slightly higher returns due to interest-on-interest effects.

Initial Deposit

Monthly Contribution

Annual Interest Rate

0%30%

Compounding Frequency

Time Period

years

1 yr50 yrs

Quick Presets

Your Growth Projection

Total Balance

$302,370

Total Contributions

$130,000

Interest Earned

$172,370

Effective Annual Rate

7.23%

Growth Over Time

Total BalanceContributions

$302K$227K$151K$76K$0

Year 1Year 10Year 20

$100K in year 10

Contributions vs. Interest Earned

Total Contributions$130,000

43%

Interest Earned$172,370

57%

Contributions (43%)

Interest (57%)

Year-by-Year Breakdown

Year	Start Balance	Contributions	Interest	End Balance
1	$10,000.00	$6,000	+$955.34	$16,955.34
2	$16,955.34	$6,000	+$1,458.14	$24,413.48
3	$24,413.48	$6,000	+$1,997.29	$32,410.77
4	$32,410.77	$6,000	+$2,575.41	$40,986.18
5	$40,986.18	$6,000	+$3,195.33	$50,181.52
6	$50,181.52	$6,000	+$3,860.06	$60,041.58
7	$60,041.58	$6,000	+$4,572.85	$70,614.43
8	$70,614.43	$6,000	+$5,337.16	$81,951.59
9	$81,951.59	$6,000	+$6,156.72	$94,108.31
10	$94,108.31	$6,000	+$7,035.54	$107,143.85
11	$107,143.85	$6,000	+$7,977.88	$121,121.72
12	$121,121.72	$6,000	+$8,988.34	$136,110.06
13	$136,110.06	$6,000	+$10,071.84	$152,181.91
14	$152,181.91	$6,000	+$11,233.68	$169,415.59
15	$169,415.59	$6,000	+$12,479.50	$187,895.09
16	$187,895.09	$6,000	+$13,815.39	$207,710.48
17	$207,710.48	$6,000	+$15,247.84	$228,958.32
18	$228,958.32	$6,000	+$16,783.85	$251,742.18
19	$251,742.18	$6,000	+$18,430.90	$276,173.08
20	$276,173.08	$6,000	+$20,197.01	$302,370.09
Total		$130,000	+$172,370	$302,370

Disclaimer: This calculator provides estimates for educational purposes only. Actual investment returns vary based on market conditions, fees, taxes, and timing of contributions. Past performance does not guarantee future results. Consult a qualified financial advisor before making investment decisions.

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About This Tool

The Compound Interest Calculator shows how your money grows over time when interest is earned on both your initial deposit and previously accumulated interest. This exponential growth effect is what Albert Einstein reportedly called "the eighth wonder of the world."

The Compound Interest Formula

This calculator uses the standard compound interest formula with regular contributions:

A = P(1 + r/n)^nt + PMT × (((1 + r/n)^nt - 1) / (r/n))

A = final amount
P = initial principal (your starting deposit)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years
PMT = periodic contribution amount

Why Compounding Frequency Matters

The more frequently interest compounds, the more you earn. Daily compounding yields slightly more than monthly, which yields more than quarterly or annually. The difference becomes more pronounced at higher interest rates and over longer time periods. The effective annual rate (EAR) captures this difference — it tells you the true annual return after accounting for compounding.

Reach a Goal: Reverse Calculator

The "Reach a Goal" mode solves the compound interest formula in reverse. Instead of projecting growth from a known contribution, it calculates exactly how much you need to invest each month to hit a specific target. This is ideal for retirement planning, college savings, or any financial milestone. The comparison table shows how different return rates dramatically impact the required monthly investment.

Real-World Examples

High-yield savings account: ~4-5% APY, compounded daily. Great for emergency funds and short-term goals.
S&P 500 index fund: Historically ~10% average annual return before inflation (~7% after). Ideal for long-term retirement savings.
401(k) with employer match: Even a 3% match on your contributions is an instant 100% return on that portion, before compounding kicks in.

New to compound interest or want to understand the math in plain language? Read our complete guide: Compound Interest Explained.

Frequently Asked Questions

What is compound interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (which only applies to the principal), compound interest causes your money to grow exponentially over time. The longer your money compounds, the faster it grows.

How does compounding frequency affect my returns?

More frequent compounding means interest is calculated and added to your balance more often, which means you earn interest on interest sooner. For example, at 7% annually on $10,000: annual compounding yields $10,700 after one year, while daily compounding yields $10,725. Over decades, this difference compounds significantly.

What is the difference between APR and APY?

APR (Annual Percentage Rate) is the stated annual rate without accounting for compounding. APY (Annual Percentage Yield) — also called the effective annual rate — includes the effect of compounding. A 7% APR compounded monthly has an APY of about 7.23%. When comparing investments, always compare APY to APY for an apples-to-apples comparison.

How much should I save monthly to reach $1 million?

With a 7% annual return compounded monthly: investing $750/month for 30 years gets you to about $1 million. Starting 10 years earlier at age 25 instead of 35, you'd only need about $400/month. This dramatic difference illustrates why starting early is the single most powerful financial decision you can make.

Does this calculator account for taxes and inflation?

This calculator shows nominal (pre-tax, pre-inflation) returns. In reality, investment gains may be subject to capital gains tax, and inflation erodes purchasing power over time. To estimate real returns, subtract the expected inflation rate (historically ~2-3%) from your interest rate. For a tax-adjusted estimate, consider that long-term capital gains are taxed at 0-20% depending on your income bracket.

How does the 'Reach a Goal' calculator work?

The goal calculator solves the compound interest formula in reverse. Given your target amount, time horizon, interest rate, and initial deposit, it calculates the exact monthly contribution needed. It uses the future value of an annuity formula: PMT = (FV - PV(1+r/n)^nt) / (((1+r/n)^nt - 1) / (r/n)). The result accounts for compounding on both your initial deposit and ongoing contributions.

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