Compound Interest Calculator
See how an investment grows over time with compound interest and optional monthly contributions.
Comment ça marche
Compound interest is interest earned on interest — unlike simple interest, which is only ever calculated on your original principal, compound interest adds each period's earnings back into the balance, so future interest is calculated on a growing amount.
For a lump sum, this calculator applies A = P(1 + r/n)ⁿᵗ, where P is your starting principal, r is the annual interest rate, n is how many times per year interest compounds, and t is the number of years.
For example, $10,000 invested at 7% annually, compounded monthly, for 20 years grows to roughly $40,550 — about 4x your original principal — even though you never added another dollar.
When you add regular monthly contributions, the math gets more complex (there's no single clean formula), so the calculator simulates it month by month: each month, the balance earns interest, then the contribution is added, and the cycle repeats. Adding just $200/month to that same $10,000 starting balance over 20 years pushes the ending total to roughly $130,000 — showing how much regular contributions can outweigh the starting amount.
Compounding frequency matters, but less than most people expect: at a 7% annual rate, compounding monthly instead of annually only adds about 0.3 percentage points of effective yield. What matters far more is time — money invested 10 years earlier, even at the same rate, ends up dramatically larger simply because it compounds for longer.
This is the same math behind savings accounts, retirement accounts (401(k)s, IRAs), and most long-term investment growth projections — but it cuts both ways. Credit card debt compounds by the identical formula, working against you instead of for you, which is why carrying a balance at a high interest rate can snowball surprisingly fast if only minimum payments are made.
To see the time-versus-amount tradeoff concretely: investing $300/month starting at age 25 and stopping entirely at 35 (10 years of contributions, then letting it sit) can end up larger by retirement than investing the same $300/month continuously starting at 35 through retirement — purely because the early contributions had more decades to compound. Time in the market tends to matter more than the exact amount contributed in any given year.
How does compounding frequency affect returns?
More frequent compounding (e.g. monthly vs. annually) yields slightly higher returns for the same nominal rate, but the effect is modest — the compounding period matters far less than the rate itself or how long the money is invested.
What's the difference between compound and simple interest?
Simple interest is calculated only on the original principal every period. Compound interest is calculated on the principal plus all previously earned interest, so growth accelerates over time.
Why does starting to invest early matter so much?
Because compounding is exponential, not linear — money invested a decade earlier has a decade more compounding cycles working on it, which often outweighs contributing more money later but starting later.
Does this calculator account for taxes or inflation?
No — it shows nominal (before-tax, before-inflation) growth. Real-world after-tax, inflation-adjusted returns will be lower, especially in taxable accounts.
What's a realistic average annual return to assume?
This varies by investment type and risk level — there's no single right answer, and past returns don't guarantee future ones. Many long-term stock market projections use a range around 6–10% before inflation, but consult a financial advisor for a figure suited to your actual portfolio.
How do regular contributions change the math?
They compound too — each contribution starts earning its own interest from the moment it's added, so consistent contributions can end up contributing more to your final balance than the original lump sum, especially over long timeframes.
What is the Rule of 72, and how does it relate to this calculator?
It's a quick mental shortcut: divide 72 by your annual interest rate to estimate how many years it takes an investment to double. At 6%, that's 72 ÷ 6 = 12 years — a useful sanity check against this calculator's more precise result.
Does compound interest work against me too, not just for me?
Yes — debt that charges compound interest, like most credit cards, grows by the same exponential math. An unpaid balance can grow substantially over time if only minimum payments are made, which is why high-interest debt is usually worth paying down aggressively.
Is it better to invest a lump sum early or contribute the same amount gradually over time?
All else equal, money invested earlier has more time to compound, so an early lump sum often ends up ahead of the same total amount contributed gradually later — though gradual contributions (dollar-cost averaging) have their own risk-management benefits worth weighing.