Compound Interest Calculator
See how investments grow over time with compound interest, including regular monthly contributions.
Final Balance
$40,387.39
4.04× initial
Total Contributions
$10,000.00
Interest Earned
$30,387.39
75.2% of total
Growth Over 20 Years
How to use this calculator
- Enter your starting investment amount.
- Optionally add a regular monthly contribution (e.g. $200/month into an index fund).
- Enter the expected annual return rate (e.g. 7% for a diversified stock index fund historically).
- Set how many years you plan to invest.
- Choose how often interest compounds — monthly is most common for savings accounts and funds.
Compound interest: why time and frequency matter
Compound interest means you earn “interest on interest”. The more often compounding occurs within a year, the slightly higher the effective growth, all else equal. For long horizons—retirement savings, index-fund scenarios, or debt that capitalizes—small rate or frequency differences dominate outcomes.
Formula core: Future value with periodic compounding uses FV = PV(1 + r/m)^(m×t) for lump sums; monthly contributions add a series of growing deposits (this tool computes both numerically). The annual percentage yield (APY) rises versus the stated APR when compounding happens more than once per year.
Use cases: projecting 401(k)/IRA balance paths, stress-testing savings rate changes, teaching students about exponential growth, or sanity-checking marketing claims (“double your money in X years” — solve for rate or time).
Common pitfalls: confusing nominal APR with APY; ignoring fees; assuming constant returns (real markets fluctuate); forgetting tax drag on interest in taxable accounts. Use this calculator as a baseline, not a forecast guarantee.
Contrast with simple interest: simple interest ignores interest-on-interest: suitable for some short bonds or punitive late-fee math, but most savings and loans you meet day-to-day are compound in practice. When comparing loans, look at amortization schedules rather than headline rates alone.
Key formulas (reference)
Lump sum with compounding m times per year: FV = PV × (1 + r/m)^(m·t). With periodic payment A at end of each period (simplified monthly case shown in tool): use iterative accumulation or closed-form annuity FV formulas depending on timing.
Related tools
These free tools pair well with this page — open them in a new tab to finish your workflow.
Frequently Asked Questions
What is compound interest?
Compound interest means earning interest on both your principal and your previously earned interest. Over time this creates exponential growth. Albert Einstein allegedly called it the 'eighth wonder of the world' — whether or not that's true, the math is compelling.
How does compounding frequency affect the result?
The more frequently interest compounds, the more you earn. Daily compounding yields slightly more than monthly, which yields more than annual. The formula for the effective annual rate is (1 + r/n)^n - 1, where n is the number of compounding periods per year.
What is the Rule of 72?
The Rule of 72 is a quick mental estimate: divide 72 by the annual interest rate to estimate how many years it takes to double your investment. At 6% annual interest, the money doubles in roughly 72 / 6 = 12 years.
How does inflation affect compound interest?
Inflation erodes purchasing power. If your investment earns 6% annually but inflation is 3%, your real return is roughly 3%. Always consider the real (inflation-adjusted) return rather than the nominal rate when planning long-term savings.
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the simple annual rate without compounding. APY (Annual Percentage Yield) includes the effect of intra-year compounding and is always ≥ APR. For savings accounts, APY is the more meaningful figure.
Can this calculator include regular contributions?
This calculator focuses on a single lump-sum investment with compound growth. For scenarios with regular contributions (monthly savings, etc.), that is handled by a separate future value of annuity formula. Many online compound interest calculators support both modes.