How to use this compound interest calculator
You only need five numbers to get a projection. Results update as you type, so drag the sliders to see how small changes play out over decades.
- Enter your initial deposit, the lump sum you start with. Use 0 if you are starting from nothing.
- Add a regular contribution and pick the contribution frequency: monthly, fortnightly (every two weeks), weekly or annually.
- Set the annual interest rate and the number of years. For a savings account, use the advertised rate. For investments, use a long-run return you consider realistic after fees.
- Choose the compounding frequency: daily, monthly, quarterly or annually. If you are not sure, monthly is a sensible default.
- Open "More options" to grow your contribution each year, set inflation for the "in today's money" figure, or make contributions at the start of each period instead of the end.
The compound interest formula
A = P × (1 + i)N + C × ((1 + i)N − 1) ÷ i A = final balance · P = initial deposit · C = contribution per period · N = number of contributions · i = interest rate per contribution period
When you contribute as often as interest compounds, for example monthly contributions with monthly compounding, the rate per period is simply the annual rate divided by 12. That is the classic textbook version: A = P(1 + r/n)nt plus the contributions.
Real life is messier. You might contribute weekly into an account that compounds monthly, or monthly into one that compounds daily. To handle any mix correctly, the calculator first converts your rate to its effective annual rate, (1 + r/m)m − 1, where m is the number of compounding periods a year. It then finds the equivalent rate for one contribution period, i = (1 + effective rate)1/p − 1, where p is the number of contributions a year. Finally it simulates every period, adding interest and then your contribution (or the other way around if you contribute at the start). This keeps the yearly growth exactly in line with the compounding you chose, and lets contributions rise each year.
Worked example
You invest $10,000 and add $500 a month for 20 years at 7%, compounded monthly. The rate per month is 0.07 ÷ 12 = 0.583%, across 240 contributions, and (1 + 0.07 ÷ 12)240 = 4.0387.
- The initial deposit grows to $10,000 × 4.0387 = $40,387.
- The monthly contributions grow to $500 × (4.0387 − 1) ÷ (0.07 ÷ 12) = $260,463.
- Final balance: $300,851. You put in $130,000, so $170,851 (57%) is interest.
In year 9, the interest earned ($6,094) beats the $6,000 you contribute that year, and by year 17 your total interest is bigger than everything you have paid in. At 2.5% inflation, the final balance is worth about $183,600 in today's money.
What drives compound growth
Time matters most
With the same $10,000 start and $500 a month at 7%, you would have $106,639 after 10 years, $300,851 after 20 and $691,150 after 30. The last ten years add more than the first twenty combined, because the balance doing the compounding is so much bigger. Starting early, even with small amounts, is the single most powerful thing you can do.
The rate of return
Small differences add up. In the example, 6% gives $264,122 and 8% gives $343,778: a two-point spread is worth almost $80,000. Fees work the same way in reverse, since a 1% annual fee effectively lowers your return by 1%.
Growing your contributions
Raising your contribution a little each year, for example with every pay rise, compounds too. Set "Annual contribution increase" to 3% and the $500 a month becomes about $877 a month by year 20. You contribute $171,222 in total, and the final balance rises from $300,851 to $367,509.
Compounding frequency
More frequent compounding helps, but far less than time or rate. Here is the same example with each option:
| Compounding | Effective annual rate | Balance after 20 years |
|---|---|---|
| Daily | 7.25% | $301,636 |
| Monthly | 7.23% | $300,851 |
| Quarterly | 7.19% | $299,252 |
| Annually | 7.00% | $292,465 |
Rule of 72: divide 72 by your annual rate to estimate how many years it takes money to double. At 7%, that is about 10.3 years. With monthly compounding the exact answer is 9.9 years, so the rule is a handy, slightly cautious shortcut.
Common mistakes to avoid
- Mixing up nominal and effective rates. Enter the nominal annual rate and choose the compounding. If you only know the APY or AER, enter it with annual compounding instead.
- Ignoring inflation. A big future number can buy less than it looks. Keep an eye on the "in today's money" figure when planning for long-term goals.
- Assuming investment returns are smooth. Shares can fall sharply in a single year. The calculator uses a steady average, which is useful for planning but not a forecast.
- Forgetting fees and tax. Both reduce the rate that actually compounds. Use an after-fee, after-tax rate if you can.
- Stopping contributions in bad years. Regular contributions keep compounding working, and raising them with your income (try "Annual contribution increase") speeds things up a lot.
Compound interest works on debt too
The same maths runs in reverse when you owe money. A $5,000 credit card balance at 24%, compounded monthly with no payments, grows to $6,341 in a year: $1,341 of interest, against $1,200 if it were simple interest. That is why clearing high-rate debt is often the best "return" available, and why the interest on a card can feel like it snowballs.
Rate terms in different countries
Banks describe the same idea in different ways. In the US, savings accounts quote an APY (annual percentage yield), which already includes compounding. In the UK the equivalent is the AER (annual equivalent rate). Australian and Canadian banks usually quote a rate "per annum" and state how often interest is paid or compounded. When comparing accounts, compare the effective annual rate, shown as a hint under the compounding field.
Saving towards a specific target, like a house deposit? The savings goal calculator works backwards from the amount you need. For long-term investing and drawing an income later, try the retirement calculator. Paying off debt at a high rate is compounding working against you, so it often makes sense to clear that first with the debt payoff planner.
Frequently asked questions
What is compound interest, in simple terms?
How often does interest compound in a savings account?
What rate should I use for investments?
What does "in today's money" mean?
Does contributing at the start of each period make a difference?
Is tax included?
This calculator gives estimates for education and planning. It is not financial advice, and your lender's figures may differ. See how we calculate.