Compound Interest
See the power of compounding
The Compound Interest Calculator shows how a starting balance grows when interest is reinvested over time. You can include regular monthly contributions and choose the compounding frequency (annual, semi-annual, quarterly, monthly, or daily).
Compounding is the single most important concept in personal finance. The same monthly contribution, started 10 years earlier, can produce a final balance two or three times larger — entirely because of compounding.
What it computes
- Final balance after a given number of years.
- Total interest earned.
- Total contributions made.
- The breakdown of growth into "your money" vs "interest earned".
The formulas
For a lump sum compounded k times per year:
FV = PV × (1 + r/k)^(k × t)
Adding a regular contribution at the same compounding frequency:
FV = PV × (1 + r/k)^(k×t) + PMT × ((1 + r/k)^(k×t) − 1) / (r/k)
Where r is the nominal annual rate, k is the number of compounds per year, and t is the number of years.
Worked example
$10,000 starting balance, $200/month, 7% annual return, 30 years, monthly compounding:
- Final balance ≈ $326,580
- Total contributions =
10,000 + (200 × 360)= $82,000 - Total interest earned ≈ $244,580
About three-quarters of the ending balance comes from interest, not contributions. That is the power of long time horizons.
When to use this
Understanding how long-term savings grow, comparing investment scenarios, and making the case to a younger family member to start saving early. It is also the right tool for visualising why credit card debt is so dangerous — running the same math on debt instead of savings shows how quickly compounding works against you.
Caveats
Compounding works in models. Real-world investments fluctuate, fees and taxes reduce returns, and a single year of unusually bad performance can change the trajectory. Treat the projected balance as an order-of-magnitude estimate, not a promise.
Frequently asked questions
Does compounding frequency matter?
A little. Daily vs monthly compounding at the same nominal rate is a fraction of a percent difference. The bigger lever is the rate itself and the time horizon.
What is the rule of 72?
A mental shortcut: 72 / interest rate ≈ years to double your money. At 8%, money doubles in about 9 years. At 6%, in about 12 years.
Should I assume contributions at start or end of period?
This calculator assumes end-of-month contributions, which is conventional and slightly more conservative than start-of-month. The difference over decades is small but non-zero.