What is the Compound Interest Calculator?
The Compound Interest Calculator projects how a starting balance and recurring monthly deposits grow once interest is reinvested and starts earning interest of its own. Unlike simple interest, which only ever pays on the original principal, compounding means every dollar of growth becomes part of next month's balance — the reason small, consistent contributions can outgrow a single larger deposit over a long enough horizon.
How to Use This Calculator
- Enter your initial principal — the amount you are investing today.
- Set your monthly contribution — money you will add automatically every month.
- Enter the expected annual return. A diversified stock portfolio has historically returned about 7% per year after inflation; high-yield savings accounts currently pay roughly 4–5%.
- Choose your time horizon in years and months.
- Read the results. The tiles show your ending balance, how much of it came from your own deposits, and how much is pure compound interest. Use View Graph to see contributions and interest stacked over time (and spot the "crossover" year when growth outpaces your deposits), or View Table for the exact year-by-year numbers. Print / Save PDF produces a clean one-page report of your inputs, the summary and the current view.
How does the underlying math work?
This calculator compounds monthly. Each month the running balance earns one-twelfth of the annual rate, and then your contribution is added:
Repeated over n compounding periods, this is equivalent to the future value of a lump sum plus the future value of an ordinary annuity:
- P — initial principal
- PMT — monthly contribution
- i — monthly rate = annual rate ÷ 12
- n — total months = (years × 12) + months
Interest earned is simply FV − (P + PMT × n): the ending balance minus every dollar you put in.
Real-world practical application
Savers use this calculator to compare a high-yield savings account against a taxable brokerage account, to size the monthly contribution needed to hit a house down-payment goal by a target date, or to show how starting ten years earlier can matter more than contributing twice as much later. It is also a common classroom tool for demonstrating why "pay yourself first" works.
Frequently Asked Questions
What is a good interest rate to assume?
Be conservative. Over long periods the S&P 500 has returned roughly 10% per year before inflation and about 7% after inflation. For cash savings, 4–5% is realistic in a higher-rate environment. Using a lower number builds in a safety margin — and if reality turns out better, that is a bonus rather than a shortfall.
How much difference does compounding frequency make?
More frequent compounding always helps, but the effect is modest at ordinary rates. $10,000 at 7% for 30 years grows to about $76,123 compounded annually versus about $81,165 compounded monthly. This tool uses monthly compounding, which matches how most brokerage and savings accounts actually credit growth.
Does this account for taxes and inflation?
No. The result is a nominal, pre-tax figure. To see what your future balance is worth in today's dollars, use the Inflation / Purchasing Power calculator. To factor in capital-gains tax on your gains, use the Real ROI calculator.
Related Calculators
- Retirement / 401(k) Estimator — apply compounding to a full career of contributions.
- Rule of 72 — a quick estimate of how long your money takes to double.
- Present & Future Value — the general time-value-of-money formula.