Compound Interest Calculator
Simulate compound investment growth with regular deposits, compounding frequency variations, and inflation-adjusted real purchasing power.
Wealth Growth Trajectory
Compounding acceleration vs invested capital curve
Compounding Speed Milestones
Annual Amortization & Compounding Schedule
Year-by-year accumulation ledger displaying principal equity vs interest accretion
| Year | Starting Amount | Yearly Contribution | Annual Interest Earned | Total Cumulative Interest | End of Year Balance |
|---|
Compound Interest Mathematical Specification
The model governing constant-contribution exponential accumulation
Where payments occur at the end of each compounding period. Multiply the contribution term by (1 + r/n) for beginning-of-period deposits.
The Compounding Mechanism: Unlike simple interest, where returns are calculated only on the principal (P × r × t), compounding adds each period's interest back to the balance, so later interest is earned on earlier interest.
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When the contribution frequency differs from the compounding frequency, the calculator converts the rate to the equivalent rate per contribution period, (1 + r/n)n/p − 1. Continuous compounding uses A = Pert.
APY vs. interest rate — which number to enter
Banks usually advertise APY (annual percentage yield), which already includes compounding. This calculator expects the nominal annual rate before compounding — entering an APY with monthly compounding would count compounding twice and slightly overstate the result. If your bank only quotes an APY, enter it as the rate and choose Annually compounding.
The power of starting early
$300 a month at 7% compounded monthly grows to about $366,000 over 30 years, but only about $156,000 over 20 years. A 10-year head start more than doubles the result while adding just $36,000 of contributions — time is usually the biggest lever in compounding.
A worked example
Start with $8,000, add $250 at the end of each month and earn 7% compounded monthly for 15 years. The balance reaches about $102,000: $53,000 from contributions ($8,000 + $45,000) and roughly $49,000 from compound growth. Stretch it to 25 years and the balance becomes about $248,000 — more than double — even though contributions rise by only $30,000.
The Rule of 72
Divide 72 by the annual rate to estimate how many years money takes to double: at 6% that is about 12 years, at 9% about 8. To model a whole portfolio with fees, see the Investment Calculator; for a fixed savings target, try the Savings Goal Calculator.
Simple vs. compound interest: $10,000 at 5%
Simple interest pays only on the original deposit; compound interest also pays on interest already earned, so the gap widens every year.
| Years | Simple interest | Compound (annual) | Extra from compounding |
|---|---|---|---|
| 10 | $15,000 | $16,289 | $1,289 |
| 20 | $20,000 | $26,533 | $6,533 |
| 30 | $25,000 | $43,219 | $18,219 |
What inflation and taxes do to compound growth
The balance the calculator shows is in future dollars. At 3% inflation, $10,000 growing at 5% for 20 years reaches $26,533, but that is worth only about $14,700 in today's purchasing power. Turn on Adjust for Inflation to see the real figure. Interest in a taxable account is also reduced by tax each year, while tax-advantaged accounts such as a 401(k) or Roth IRA let the full balance keep compounding. Use the inflation calculator or the retirement calculator to model it.
Common compound interest mistakes
- Starting late. Each year of delay removes a year of growth on the entire balance, and the final years are where compounding adds the most.
- Entering the APY as the rate. APY already includes compounding, so entering it as the interest rate counts the compounding twice.
- Assuming a steady return. Market returns vary year to year; treat the result as a projection, not a promise.
- Ignoring fees. A 1% annual fee takes roughly a fifth of a 5% return, and the loss compounds too.
- Withdrawing early. Every withdrawal removes the interest it would have earned for the rest of the term.
Frequently asked questions
What's the difference between simple and compound interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus any interest already earned, so it grows faster over time.
How often should interest compound for the best results?
More frequent compounding (daily or monthly) produces slightly higher returns than annual compounding at the same nominal rate, though the difference is usually small.
Should I enter my bank's APY or interest rate?
Enter the interest rate before compounding. If only an APY is listed, enter it as the rate with annual compounding so compounding isn't counted twice.
What's a realistic compound growth rate to assume?
Historical long-term stock market averages run around 7-10% before inflation, though returns vary significantly year to year and aren't guaranteed. Savings accounts pay a variable rate that follows central-bank rates.
Does this calculator account for inflation?
Yes, optionally. With Adjust for Inflation on, the Real Purchasing Power figure divides the final balance by (1 + inflation)years to show its value in today's money.
Does compounding frequency matter much?
Less than most people think. At 5% for 10 years, $10,000 grows to $16,289 compounded annually, $16,470 monthly and $16,487 daily — the rate and time invested matter far more.
What is the Rule of 72?
A quick mental shortcut: divide 72 by your annual growth rate to estimate how many years it takes an investment to double. At 8% growth, that's about 9 years.
Formulas checked against standard time-value-of-money methods · Our methodology · Last updated September 2026