About the Compound Interest Calculator
Compound interest means you earn interest on your interest. The difference from simple interest looks small at first, but it snowballs over long periods. This calculator handles a lump sum and regular monthly contributions together — for a savings account, index funds, a 401(k) or an IRA — and splits the result into the money you put in and the growth from compounding, year by year.
How to use
- Enter your initial deposit and your monthly contribution. You can leave either one at zero.
- Enter the expected annual return and the number of years.
- Pick the compounding frequency: Monthly for most savings accounts and funds, Annually if interest is credited once a year.
- Read the final balance, total contributions and interest, and the year-by-year chart and table.
Compound interest formula
A principal P invested at an annual rate r for n years grows to P × (1 + r)ⁿ with annual compounding and P × (1 + r/12)12n with monthly compounding. With a monthly contribution C, the future value with monthly compounding is P(1+i)m + C × ((1+i)m − 1) ÷ i, where i = r/12 and m is the number of months.
- Contributions are made at the end of each month.
- With annual compounding, money added during the year earns simple interest until year-end, then compounds with the rest.
- Taxes, fund fees and inflation are not deducted: results are nominal, pre-tax figures.
Example: $10,000 plus $500 a month at 7% for 20 years grows to about $300,851 with monthly compounding — $130,000 contributed and $170,851 of interest.
The Rule of 72
Divide 72 by the annual return in percent to estimate how many years it takes to double your money: 72 ÷ 6 = about 12 years at 6%, about 9 years at 8%. The exact answer is ln 2 ÷ ln(1 + r); for returns between 4% and 12% the rule is off by only a few months.
| Annual return | Rule of 72 | Exact (annual) |
|---|---|---|
| 3% | 24.0 years | 23.4 years |
| 5% | 14.4 years | 14.2 years |
| 7% | 10.3 years | 10.2 years |
| 10% | 7.2 years | 7.3 years |
FAQ
How much difference does monthly vs. annual compounding make?
Monthly compounding earns slightly more at the same rate: 7% compounded monthly equals an effective annual yield (APY) of about 7.23%. $10,000 over 10 years becomes about $19,672 with annual and $20,097 with monthly compounding.
Can I use it for stock market or index fund returns?
Yes, as an estimate. Real market returns vary from year to year, so the actual result will differ. Use a long-term average return (and a range of scenarios) to set goals rather than to predict an exact figure.
How do I account for taxes?
In a taxable account, multiply the return by (1 − your tax rate) for a rough after-tax figure. Tax-advantaged accounts such as a 401(k), IRA or Roth IRA let the full return compound, which is why they grow faster over decades.
How do I adjust for inflation?
Enter a real return — the expected return minus expected inflation, e.g. 7% − 3% = 4% — to see the result in today’s dollars.