Compound Interest Calculator

What Is Compound Interest?

Compound interest is interest earned on both your original deposit and on the interest that deposit has already earned. Simple interest only ever pays on the principal, so it grows in a straight line. Compound interest pays on a growing balance, so the curve bends upward over time — slowly at first, then faster.

That is why time matters more than almost any other input. Doubling the number of years usually does far more than doubling the interest rate, because each year of growth builds on every year before it.

The Formula Behind the Calculator

For a single lump sum, the future value is:

A = P × (1 + r/n)^(n × t)

P = initial investment   r = annual rate (e.g. 0.08)
n = compounding periods per year   t = years

How Monthly Contributions Are Handled

Most people save a fixed amount every month rather than investing one lump sum. This calculator adds your monthly contribution at the start of each month and then applies one month of interest (annual rate ÷ 12) to the whole balance. The chart and results show how much of your final balance came from your own deposits and how much came from interest.

Because deposits are added before interest is applied, the results are slightly higher than a formula that assumes deposits at the end of each month. The difference is small — well under 1% over most horizons — but it explains why other calculators may show a marginally different figure.

Worked Example

Say you invest $10,000 today, add $500 every month, and earn an average of 8% per year for 20 years.

• Total you put in: $10,000 + ($500 × 240 months) = $130,000
• Ending balance: about $345,700
• Interest earned: about $215,700 — more than your own contributions
• The $10,000 lump sum alone would grow to about $49,300

Tips for Getting Realistic Results

• Use a conservative rate. Long-run stock market averages are often quoted around 7–10% before inflation, but individual years vary widely and no return is guaranteed.
• Think in today’s money. Subtracting expected inflation (for example 2–3%) from your rate gives a rough “real” return, so the result reflects what the money will actually buy.
• Remember fees and taxes. A 1% annual fee reduces your effective rate by 1% every year, which compounds against you just as returns compound for you.
• Try small changes. Adding $100 per month or starting five years earlier often matters more than chasing a slightly higher return.

How often is interest compounded in this calculator?

Interest is applied monthly at one-twelfth of the annual rate, which matches how most savings accounts and investment projections are presented.

What is the Rule of 72?

Divide 72 by your annual interest rate to estimate how many years it takes for money to double. At 8%, money roughly doubles every 9 years; at 6%, every 12 years.

Is compound interest guaranteed?

Only for fixed-rate products such as certificates of deposit or savings accounts. For stocks and funds, the rate you enter is an assumed average; actual returns can be higher or lower and can be negative in some years.

Does this calculator account for inflation or taxes?

No. Results are in nominal dollars before taxes. To approximate today’s purchasing power, lower the rate by your expected inflation rate, or use the Inflation Calculator to adjust the final figure.