Compound Interest Calculator
Work out how much a lump sum and regular monthly deposits will grow to, with any interest rate and compounding frequency.
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Compound interest is the reason a modest savings habit can turn into a large sum. Each period, interest is added to your balance, and from then on that interest earns interest of its own. This calculator shows the effect for a starting lump sum, regular monthly deposits, or both.
How to use the compound interest calculator
- Enter your starting amount. Use 0 if you are starting from nothing.
- Enter the annual interest rate or the return you expect.
- Set the time in years.
- Choose how often interest compounds. Savings accounts usually compound daily or monthly, and many bonds compound every six months.
- Add a monthly contribution if you plan to keep saving.
The final balance, total contributed and interest earned update as you type. The effective annual rate shows what the quoted rate is really worth once compounding is included.
The compound interest formula
For a single lump sum, the classic formula is:
A = P × (1 + r/n)^(n × t)- A is the final amount
- P is the starting principal
- r is the annual rate as a decimal (7% = 0.07)
- n is the number of times interest compounds per year
- t is the number of years
Regular deposits add a second part, the future value of an annuity. Because your deposits are monthly but compounding might be daily or yearly, the calculator first converts the rate into an equivalent monthly rate, i = (1 + r/n)^(n/12) − 1, and then adds:
Deposits = C × ((1 + i)^m − 1) ÷ iwhere C is the monthly contribution and m is the number of months.
Worked example
You invest $10,000 at 7% compounded monthly and add $200 at the end of every month for 10 years.
- The lump sum grows to 10,000 × (1 + 0.07/12)^120 ≈ $20,097
- The 120 deposits of $200 grow to about $34,617
- Final balance ≈ $54,714
- You put in $10,000 + $24,000 = $34,000, so about $20,714 is interest
Time does most of the work
Keep the same $10,000 start, $200 a month and 7% rate, and only change the time:
| Years | You contribute | Final balance | Interest earned |
|---|---|---|---|
| 10 | $34,000 | $54,714 | $20,714 |
| 20 | $58,000 | $144,573 | $86,573 |
| 30 | $82,000 | $325,159 | $243,159 |
Between year 20 and year 30 you add only $24,000 of your own money, yet the balance grows by more than $180,000. That is why starting early beats almost any other saving strategy.
The Rule of 72
For a quick mental check, divide 72 by the annual rate to estimate how many years it takes money to double. At 7%, money doubles in roughly 72 ÷ 7 ≈ 10.3 years, which matches the lump sum in the example above growing from $10,000 to about $20,000 in ten years. The rule works best for rates between about 4% and 12%.
Tips and common mistakes
- Use a realistic rate. Savings accounts pay what the bank quotes. For stock investments, a long-run assumption of 5–7% after inflation is more prudent than recent best years.
- Compare APY, not headline rates. Two accounts with the same nominal rate can pay different amounts if one compounds more often. The effective annual rate puts them on equal terms.
- Remember fees. A 1% annual fee on a fund lowers a 7% return to about 6%, which over 30 years can cost you a fifth of the final balance. Subtract fees from the rate before calculating.
- Do not forget inflation. $325,000 in 30 years will buy much less than it does today. Run the numbers again with your rate minus expected inflation to see the result in today’s money.
- Small increases matter. Raising the contribution from $200 to $250 a month adds $18,000 of deposits over 30 years, but with compounding it adds about $61,000 to the final balance.
Interest rates, tax treatment and investment returns vary. Treat the results as an estimate for planning, not a guarantee.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the money you put in. Compound interest is also paid on the interest you have already earned, so the balance grows faster every year. Over long periods the gap becomes very large.
How much difference does the compounding frequency make?
Less than most people expect. At 7%, yearly compounding gives an effective rate of 7.00%, monthly gives 7.23% and daily gives 7.25%. The rate itself and the time you stay invested matter far more.
What is APY and how does it relate to this calculator?
APY (annual percentage yield) is the effective annual rate after compounding. The calculator shows it as the effective annual rate, so you can compare a 7% account compounded monthly with one quoted as a 7.2% APY.
Does the calculator account for taxes or inflation?
No. It shows the nominal balance before tax. To see the result in today's money, use a rate that is your expected return minus inflation, for example 7% minus 3% gives a real rate of about 4%.
When are the monthly contributions added?
At the end of each month. If you deposit at the start of the month instead, your final balance will be slightly higher because each deposit earns one extra month of interest.