Compound interest is what happens when your money earns a return, and then those earnings start earning their own return. Over time, this “growth on growth” can make a big difference in how large your savings or investment balance becomes compared with saving cash in a simple account that pays little or no interest.
Compound Interest Calculator
How to use this compound interest calculator
This calculator is designed to be simple enough for everyday planning but detailed enough to show how powerful compound interest can be. By default it assumes monthly contributions and annual compounding, but you can change both the contribution frequency and how often interest compounds to match your own situation.
Here is how each input works:
- Starting amount ($): How much you already have saved or invested today. For example, if you already have $10,000 in an investment account, enter 10000 here.
- Contribution amount ($): How much you plan to add to the account based on the contribution frequency you choose. For example, with a $300 contribution amount and “Monthly” selected, you are adding $300 every month.
- Contribution frequency: How often you plan to add money, such as monthly or annually. More frequent contributions usually help your balance grow faster over time.
- Years to grow: How long you plan to keep the money invested. For long-term goals like retirement or college savings, many people choose time horizons of 10, 20, or 30 years or more.
- Annual interest rate (%): The average return you expect each year. Broad U.S. stock market index funds have historically returned around 7% per year after inflation over long periods, but any future return is uncertain.
- How often will your interest compound?: How many times per year interest is added to your balance, such as annually, quarterly, monthly, or daily. More frequent compounding means interest is calculated on your growing balance more often, which can slightly increase your final amount.
As you edit the numbers, the calculator updates automatically. There is no “Calculate” button. If something looks off or unrealistic (for example, a negative time horizon or an extremely high interest rate), the calculator shows an error message instead of misleading results.
To see how the math works in practice, try this example scenario that matches the default settings in the calculator:
- Starting amount: $10,000
- Contribution amount: $300
- Contribution frequency: Monthly
- Years to grow: 25
- Annual interest rate: 7%
- Compounding frequency: Annually
With those inputs, your total contributions over 25 years would be $100,000, but your final balance could be around $281,970. Roughly one-third of your ending balance comes from the money you put in, and about two-thirds is compound growth over time.
Tip: If your goal is decades away, increasing your monthly contribution by even $25 or $50 can have a big impact over time. Run a few scenarios with different contribution amounts and frequencies to see how much faster your balance could grow.
Understanding your results: contributions vs. compound growth
The results panel is designed to answer two common questions clearly: “How much could I have?” and “How much of that comes from compound interest?” This is where the calculator tries to go beyond simple future value math and highlight the role of time and growth.
The main metrics you will see are:
- Future value: The projected balance at the end of your chosen time period, assuming your contributions, compounding schedule, and rate of return stay the same.
- Total contributions: The total amount you personally invested, including your starting amount plus all contributions over time based on the frequency you selected.
- Compound growth earned: The difference between your future value and your total contributions. This is the amount that comes from returns compounding over time.
Below the summary numbers, a simple breakdown bar shows what share of your final balance is contributions versus compound growth. If you invest for a short time or at a very low interest rate, most of your final balance will be contributions. As you extend the time horizon, increase your contributions, or assume a higher return, the compound growth portion usually becomes larger and can eventually dominate the total balance.
| Scenario | Years | Contribution pattern | Approx. future value | Approx. interest share |
|---|---|---|---|---|
| Short-term saving | 5 | $200/month | Roughly low tens of thousands | Smaller share, most is contributions |
| Medium-term investing | 15 | $300/month | Roughly mid five figures to low six figures | Balanced between contributions and growth |
| Long-term investing | 25+ | $300–$500/month | Often six figures or more | Growth can exceed contributions by a wide margin |
Note: These scenarios are simplified and rounded. They assume steady returns and do not include taxes, investment fees, or market downturns. Real-world investment performance will vary from year to year.
How compound interest works in plain English
At a basic level, compound interest follows a mathematical formula that takes into account your starting balance, the rate of return, how often that return is applied, and how many periods you invest for. A common version of the formula for growth with contributions looks like this:
Future value = Starting amount × (1 + r)n + Contribution × [((1 + r)n − 1) / r]
In that formula, r is the periodic interest rate (for example, a monthly rate if compounding is monthly) and n is the number of periods. The idea is that every period your money earns a return, and those returns stay in the account so they can earn more in the next period.
Some key ideas to remember about compound interest and long-term investing:
- Time in the market usually matters more than timing the market. Starting earlier, even with smaller amounts, can sometimes beat starting later with larger contributions.
- Returns are rarely smooth. In real life, markets move up and down. The calculator assumes a steady average rate for simplicity, but actual returns will vary from year to year.
- Fees and taxes reduce your effective return. Investment fees, fund expenses, and taxes on gains can reduce your net growth, especially over many years.
- Inflation reduces future purchasing power. If inflation averages 2% to 3% per year, a nominal return of 7% might feel closer to a 4%–5% “real” return after inflation over the long run.
Important: This calculator is an educational tool. It does not provide investment, tax, or retirement advice and does not account for your full financial situation. Before making big decisions, consider talking with a qualified financial professional or using multiple tools and sources.
Frequently Asked Questions (FAQs)
What is a reasonable interest rate to use in a compound interest calculator?
There is no single “correct” rate, because future returns are uncertain. For diversified stock market investments, many people use long-run averages in the 6%–8% per year range before inflation, based on historical data for broad U.S. stock indexes. More conservative portfolios or savings accounts may justify using lower rates like 2%–4% per year.
Does this calculator include taxes, fees, or inflation?
No. To keep the math simple and fast, this calculator uses a single annual interest rate and does not include investment costs, account fees, taxes, or inflation. In real life, all of those factors affect your actual returns. If you want a more conservative estimate, you can try plugging in a lower interest rate.
How often does this calculator compound interest?
The calculator uses the compounding frequency you select, such as annually, quarterly, monthly, or daily. Your contribution schedule also follows the contribution frequency you choose. By default, the example assumes monthly contributions with annual compounding, which is similar to many online compound interest tools.
What happens if I stop making regular contributions?
If you stop contributing but leave the money invested, compound interest still works on your existing balance. Your final amount will be lower than if you kept contributing, but it will generally be higher than if you had simply moved the money to a non-interest-bearing account.
Is compound interest guaranteed?
No. Compound interest is a mathematical idea, but real investments are subject to market risk. Savings accounts and certificates of deposit (CDs) can offer more predictable interest, but returns are usually lower than long-term stock market returns. Investments that offer higher potential returns usually come with more volatility and risk.