Compound Interest
Free compound interest calculator with monthly contributions. See yearly growth, total interest earned and final balance.
Investment details
Contributions are added at the start of each month.
Balance after 20 years
$145,180
$58,000 contributed + $87,180 interest earned
Growth by year
Compound interest is interest earned on interest. A balance growing at 8% does not add the same amount every year — it adds 8% of a number that keeps getting bigger, which is why long-term charts curve upward rather than rising in a straight line.
This calculator shows that curve year by year, including regular monthly contributions, so you can see exactly how much of your final balance came from money you deposited and how much the growth generated on its own.
How to use the Compound Interest
Enter your starting amount
The lump sum you begin with. Zero is fine if you are starting from nothing and contributing monthly.
Add your monthly contribution
Regular deposits usually matter more than the opening balance over long periods.
Set the annual interest rate
Use a realistic figure: 4%–5% for a high-yield savings account, 6%–7% for a diversified stock portfolio after inflation.
Choose the number of years
Compounding needs time. The difference between 10 and 30 years is far larger than most people expect.
Read the year-by-year table
It separates total contributions from interest earned, so you can see the year the growth overtakes your own deposits.
The formula
For a lump sum: A = P(1 + r/n)^(nt) — where P is the principal, r the annual rate, n the compounding periods per year, and t the years.
With regular contributions, each deposit compounds for a different length of time, so the future value of the contribution stream is added separately: FV = PMT × [((1 + r/n)^(nt) − 1) / (r/n)]. This calculator handles both parts.
Simple versus compound interest
$10,000 at 7% a year, with no further deposits:
| Years | Simple interest | Compound interest | Difference |
|---|---|---|---|
| 5 | $13,500 | $14,026 | $526 |
| 10 | $17,000 | $19,672 | $2,672 |
| 20 | $24,000 | $38,697 | $14,697 |
| 30 | $31,000 | $76,123 | $45,123 |
| 40 | $38,000 | $149,745 | $111,745 |
Over 40 years compounding produces nearly four times what simple interest does on the same money. The gap widens with every year.
The Rule of 72
To estimate how long money takes to double, divide 72 by the annual return. At 6% it is 12 years; at 9%, eight years; at 2%, 36 years.
The same rule works against you. At 3% inflation, prices double in 24 years — which is why cash left in a low-interest account loses purchasing power even as the balance rises.
How often interest compounds
$10,000 at 6% for 10 years, under different compounding frequencies:
| Compounding | Final balance |
|---|---|
| Annually | $17,908 |
| Quarterly | $18,140 |
| Monthly | $18,194 |
| Daily | $18,221 |
Frequency helps, but far less than rate or time. Do not choose an account for daily compounding over one with a meaningfully higher APY.
APR, APY and why the difference matters
APR is the simple annual rate, ignoring compounding. APY — sometimes EAR — includes it, and is therefore the honest number. A 6% APR compounded monthly is a 6.17% APY.
In the US, savings accounts are advertised by APY, while loans are advertised by APR. When comparing anything, make sure both sides use the same measure.
Making compounding work in practice
- Start now rather than perfectly. A year of delay at 7% costs roughly 7% of everything that money would ever have become.
- Automate the contribution. Money moved on payday is money that compounds; money moved at month end is money that gets spent.
- Reinvest dividends and interest. Compounding cannot happen on money you withdraw.
- Watch fees. A 1% annual fee sounds trivial but can consume roughly a quarter of a 30-year balance.
- Use tax-advantaged accounts. Tax drag in a taxable account is a silent reduction in the effective rate.
Frequently asked questions
What is compound interest in simple terms?
Interest paid on your interest as well as your original deposit. Year one you earn interest on the deposit; year two you earn it on the deposit plus year one’s interest, and so on — which is why growth accelerates.
What is the Rule of 72?
A shortcut for how long money takes to double: divide 72 by the annual rate. At 8% it is nine years. It is accurate enough for mental arithmetic between about 4% and 12%.
Does compounding frequency make a big difference?
Less than most people assume. Daily versus annual compounding on $10,000 at 6% for a decade differs by about $313. The rate and the time horizon matter far more.
What rate should I use for investments?
The S&P 500 has returned roughly 10% nominal a year historically, or about 7% after inflation. Using 6%–7% keeps projections honest; savings accounts are currently 4%–5%.
What is the difference between APR and APY?
APR ignores compounding, APY includes it. A 6% APR compounded monthly equals a 6.17% APY. Savings products advertise APY; loans advertise APR.
Can compound interest work against me?
Yes, and aggressively. Credit card balances compound daily at 20%–29% APR, which is why a balance left unpaid grows so quickly. The same mathematics, pointed the other way.
Does the calculator account for inflation?
The main result is nominal. To think in today’s money, subtract expected inflation from your return — a 7% return with 3% inflation is roughly 4% in real terms.
Are taxes included?
No. In a taxable account, interest and dividends are taxed annually, which reduces the effective compounding rate. Inside a 401(k), IRA or Roth, growth compounds untaxed.
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