Finance
Compound Interest Calculator
Model the growth of an investment or savings account. Enter a starting balance, monthly contribution, rate, and time horizon to see the future value and how much of it is compound growth versus your own contributions.
Quick answer: With monthly compounding, $10,000 plus $300/month at 7% grows to about $250,000 in 25 years — and most of that gain is compound growth, not your own contributions.
How it works
1. Set principal and contributions
Enter your starting balance (principal) and any regular contributions you plan to add. Contributions compound alongside the principal, so steady monthly deposits often outgrow a large one-time lump sum over long horizons. The earlier money goes in, the more time it has to grow.
2. Choose rate and compounding frequency
Set the annual interest or return rate and how often it compounds — daily, monthly, or annually. More frequent compounding produces slightly higher growth because interest starts earning interest sooner. The calculator applies the standard compound-interest formula across each period.
3. Let time do the heavy lifting
Compounding is exponential, so the longest time horizon matters most — the final years produce the largest dollar gains. The calculator shows how a balance accelerates over time and separates contributions from earned interest. Small differences in rate or time can mean large differences at the end.
Frequently asked questions
What is compound interest?
Compound interest is interest earned on both your principal and previously earned interest. Over long horizons it's the main driver of investment growth — earnings start generating their own earnings.
How does contribution frequency matter?
Adding money monthly rather than once a year gives each dollar more time to compound. This calculator compounds monthly and applies contributions each month.
What rate should I assume?
Historical broad stock-market returns average roughly 7% after inflation, but they vary widely year to year. Use a conservative rate for planning and revisit it regularly.
What is the rule of 72?
The rule of 72 estimates how long money takes to double: divide 72 by the annual rate of return. At 8%, money doubles in about 9 years (72 / 8); at 6%, about 12 years. It is a quick mental shortcut and is most accurate for rates between roughly 5% and 12%.
How is compound interest different from simple interest?
Simple interest is earned only on the original principal, while compound interest is earned on the principal plus all previously accumulated interest. Over time compounding pulls far ahead — interest earning its own interest is what drives exponential growth in savings and investments.
Does compounding frequency really matter?
It matters, but less than people expect. Moving from annual to monthly compounding at the same rate adds only a fraction of a percent to your effective yield; daily compounding adds a little more still. The rate, contributions, and time horizon affect your ending balance far more than frequency.
Why does starting early matter so much?
Because compounding is exponential, the earliest dollars have the most years to multiply. Investing $5,000 at 25 can outgrow $5,000 invested at 35 by roughly double by retirement, even though the amount contributed is the same. The final years of any compound curve produce the biggest dollar gains.