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Compound Interest Calculator

Compound interest is calculated on a balance that already includes the interest added before it, so growth accelerates over time. Set the compounding frequency to match your account — it makes a real difference — and add a monthly contribution if you save regularly.

How often interest is added to the balance

Optional — added at the end of each month

Enter a starting amount or a monthly contribution, plus a rate and time period.

How to use this tool

  1. Enter your starting amount. You can leave it at zero if you are starting from nothing and only contributing monthly.
  2. Enter the annual interest rate as a percentage.
  3. Enter how many years the money will be invested.
  4. Set the compounding frequency to match your account — monthly and daily are the most common.
  5. Optionally add a monthly contribution to model regular saving.

Formula and method

Growth of the starting amount

A = P × (1 + r ÷ n)^(n × t)
P
— starting amount
r
— annual rate as a decimal
n
— compounding periods per year
t
— years

Each period the balance is multiplied by (1 + r ÷ n). Doing that n × t times is what produces the exponent.

Growth of regular contributions

FV = C × [((1 + i)^m − 1) ÷ i]
C
— contribution per period
i
— rate for one contribution period
m
— number of contributions

This is the future value of an ordinary annuity — it assumes each deposit is made at the end of its period, which is the conservative assumption. Depositing at the start of each period earns slightly more.

Effective annual rate

EAR = (1 + r ÷ n)^n − 1

Converts a nominal rate and its compounding frequency into the single figure you actually earn over a year. It is the only fair way to compare two accounts quoted on different bases.

Worked examples

$1,000 at 5% for 10 years, compounded annually

  1. Multiplier per year: 1 + 0.05 = 1.05
  2. Over ten years: 1.05^10 = 1.6289
  3. Balance: 1000 × 1.6289 = 1628.89

$1,628.89, of which $628.89 is interest.

The same money compounded monthly instead

  1. Monthly rate: 0.05 ÷ 12 = 0.0041667
  2. Over 120 months: 1.0041667^120 = 1.6470
  3. Balance: 1000 × 1.6470 = 1647.01

$1,647.01 — about $18 more, purely from compounding sooner.

$1,000 plus $100 a month for 5 years at 6%, compounded monthly

  1. The starting amount grows to about $1,349
  2. Sixty contributions of $100 total $6,000 and grow to about $6,977
  3. Total deposited: $7,000

About $8,326 in total, of which roughly $1,326 is interest.

Notes and limitations

  • Contributions are assumed to be made at the end of each month. Depositing at the start of the month earns one extra period of interest on every payment, which adds up over long horizons.
  • The rate is assumed to stay constant for the whole term. Real savings rates move, so treat long projections as illustrations rather than forecasts.
  • Inflation is not accounted for. A balance that grows 5% a year while prices rise 3% has gained roughly 2% in real purchasing power.
  • Tax on interest or investment gains is not deducted, and the treatment varies widely by country and account type.
  • This projects a fixed interest rate. It is not a model of stock market returns, which vary year to year and can be negative.

Frequently asked questions

How does compound interest work?

Interest is added to your balance, and the next round of interest is calculated on that larger balance. The growth curve steepens over time, which is why the final years of a long investment contribute far more than the first.

Does compounding frequency really matter?

Yes, though less than people expect. On $1,000 at 5% over ten years, moving from annual to monthly compounding adds about $18. Moving from monthly to daily adds only about another $1. The rate and the time matter far more.

What is the difference between nominal rate and APY?

The nominal rate is the headline figure before compounding is taken into account. The effective annual rate, or APY, is what you actually earn once compounding is included. A 12% nominal rate compounded monthly is an effective 12.68%.

How long will it take to double my money?

Divide 72 by the interest rate for a quick estimate — at 6% money roughly doubles in twelve years. It is an approximation that works well for rates between about 4% and 12%.

Should I use this to model stock market returns?

Not really. This assumes a fixed rate every year, whereas market returns vary and can be negative. It is useful for a rough long-term illustration using an assumed average, but the smooth curve it draws is not what an investment actually does.

What is the rule of 72?

A shortcut for estimating doubling time: divide 72 by the annual percentage rate. It is accurate enough for mental arithmetic in the 4–12% range and drifts at the extremes.

Does the calculator account for inflation or tax?

No. Both depend on where you live and what type of account you hold. Subtract your expected inflation rate from the interest rate if you want a rough figure in today's money.

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