What is Compound Interest?
Compound interest is interest that earns interest. With simple interest, a 10% rate on 1,000 pays 100 every year, forever. With compound interest, the first year’s 100 joins the principal, so year two pays 110, year three 121, and the balance accelerates — slowly at first, dramatically over decades. This snowball is the engine behind long-term investing and, on the other side of the ledger, behind runaway credit card debt.
What Does This Tool Do?
This calculator projects how a balance grows given an initial amount, an optional monthly contribution, an annual interest rate, and a time horizon. It shows the final balance, how much of it you contributed, and how much is pure interest — plus a year-by-year breakdown table so you can watch the compounding curve bend upward.
The simulation adds contributions at the end of each month and converts your annual rate to the equivalent monthly rate for the chosen compounding frequency (annual, quarterly, monthly, or daily), so frequencies are compared fairly.
How to Use This Tool
- Enter the initial amount (can be 0 if you’re starting from scratch).
- Enter a monthly contribution (can be 0 for a lump-sum projection).
- Set the expected annual rate and the number of years.
- Read the tiles and the year-by-year table — everything updates as you type.
A Worked Example
10,000 initial, 200/month, 8% a year, compounded monthly, for 10 years:
| Amount | |
|---|---|
| Total contributed | 34,000 |
| Interest earned | ~14,900 |
| Final balance | ~48,900 |
Run the same inputs for 30 years and contributions total 82,000 — but the balance passes 390,000. That asymmetry is the entire lesson of compounding: time in the market is the variable that matters most, more than rate and far more than timing. The interest column of the breakdown table makes it visible — in early years interest is pocket change; in late years it dwarfs your contributions.
The Rule of 72
For a quick mental estimate of doubling time, divide 72 by the annual rate: at 8%, money doubles roughly every 72 ÷ 8 = 9 years; at 6%, every 12 years. It’s an approximation (accurate within half a year for rates between 4% and 15%) and a great sanity check on any projection — 30 years at 8% is about 3.3 doublings, so 10,000 should land near 10,000 × 2³·³ ≈ 100,000, which matches the calculator.
Does Compounding Frequency Matter?
Less than people expect. 10,000 at 8% for 10 years yields 21,589 with annual compounding, 22,196 with monthly, and 22,253 with daily — the jump from annual to monthly is real but small, and from monthly to daily nearly negligible. The frequency toggle is here because loan and savings products quote different conventions, not because it will change your life. Rate and time will.
Frequently Asked Questions
Is my financial data private?
Yes. Every calculation runs in your browser — the numbers you enter are never transmitted or stored.
What rate should I assume for investments?
There’s no guaranteed number. Long-run averages for broad stock indexes have historically been in the 6–10% nominal range before inflation, while savings accounts and bonds sit far lower. Run the projection with a conservative and an optimistic rate to see the range — and remember past averages don’t promise future returns.
Does the calculator account for inflation or taxes?
No — results are nominal and pre-tax, like most product quotes. To think in today’s purchasing power, use a rate reduced by expected inflation (e.g. 8% nominal − 3% inflation ≈ 5% real). Taxes depend on your country and account type.
Are contributions made at the start or end of each month?
At the end, the more conservative convention (an “ordinary annuity”). Start-of-month contributions would earn one extra month of interest each — a small upward shift.
Can I model debt with this?
Partially. With a positive rate, zero contributions, and the debt as the initial amount, you’ll see how an unpaid balance grows. Amortized loans with fixed payments (mortgages, car loans) need a dedicated loan calculator — one is on our roadmap.
Why doesn't my bank's projection match exactly?
Products differ in day-count conventions, fee timing, and when contributions land. This calculator uses clean, standard assumptions; expect real products to be within a few percent of it, not identical.