Compound Interest Calculator

What compounding actually buys you

Compound interest is interest paid on interest already earned. Over a year it is barely visible; over twenty it is usually the majority of the balance. This calculator projects a starting amount plus a regular monthly addition forward at a chosen return, and — more usefully — splits the final balance into the part you paid in and the part the growth added, which is the comparison that makes the case for starting early.

A worked example: $10,000 and $200 a month

Start with $10,000, add $200 a month, assume a 7% annual return compounded monthly, and run it for 20 years. The projected balance is $144,572.72. You paid in $58,000 of that — the original $10,000 plus 240 contributions of $200 — so $86,572.72 is growth. Sixty per cent of the final pot is money you never earned at work.

The shape of the curve matters more than the endpoint. After one year the balance is $13,201.42, of which only $801.42 is interest. After ten years it is $54,713.58 with $20,713.58 of interest. The second decade adds roughly $90,000; the first added roughly $45,000, on nearly identical contributions.

The formula and the frequency

For each period the calculator multiplies the balance by (1 + r), where r is the annual rate divided by the number of compounding periods in a year, then adds that period’s contribution. Repeat for every period. With no contributions this collapses to the textbook form A = P(1 + r/n)^(nt).

Compounding frequency is a real but modest effect. Take $10,000 at 7% for 10 years with no additions: compounded yearly it reaches $19,671.51, twice a year $19,897.89, quarterly $20,015.97, monthly $20,096.61, and daily $20,136.18. The whole distance from annual to daily is about $465 on $10,000 — worth knowing, and much smaller than a half-point difference in the rate itself.

How contributions are handled

Contributions are entered monthly but spread evenly across whatever compounding frequency you choose, so the two settings can differ without the total paid in changing. Choose yearly compounding with $200 a month and the calculator credits $2,400 once a year rather than pretending you saved nothing; the timing shifts, the amount does not.

The assumptions that will not hold

The projection applies a single, constant return every single period. No real investment does this. A fund averaging 7% delivers it as a scatter of years between roughly −40% and +30%, and the order those years arrive in changes the outcome — badly so if the poor years land late, when the balance is large.

Also absent: tax on interest, dividends or gains; platform and fund fees, which are typically charged as a percentage of the balance and so scale with the number this page is showing you; and inflation, which means the final figure is in future dollars, not today’s. A 7% nominal return with 2.5% inflation is about 4.4% real. For a projection that shows both, use the retirement calculator, which discounts the result back to today’s money.