Compound Interest Calculator
See how your money grows over time. Enter a starting amount, a monthly contribution, an expected return and a time horizon — then watch compound interest do the heavy lifting, year by year.
Enter your numbers
New to this? Leave the defaults — they're realistic — and just change the amounts and rate to match your plan.
Contributions vs. interest
How much of your final balance is money you put in versus interest the balance earned for you.
Year-by-year growth
How your balance builds each year. Expand for a running breakdown of contributions and interest.
| Year | Starting balance | Contributions | Interest earned | Ending balance |
|---|
Show full breakdown with running totals
| Point in time | Interest that year | Contributions to date | Interest to date | Ending balance |
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How compound interest works
Compound interest is simply interest earned on top of interest. Each period, your balance earns a return; that return is added to the balance, and the next period earns a return on the new, larger total. With simple interest you'd only ever earn on your original deposit — with compounding, every dollar of interest you earn starts earning interest of its own.
That small difference becomes enormous over time. Early on, your balance is small, so the interest each month is modest and most of your growth comes from the contributions you're adding. But as the balance grows, the interest portion grows with it. Eventually the account can earn more in a single year from interest alone than you contribute the whole year — that's the snowball effect, and it's why long time horizons matter so much.
This is also why starting early beats starting big. A modest amount invested in your twenties has decades to compound, while the same amount invested in your fifties has only a few growth cycles left. The investor who starts earlier often ends up ahead even if they contribute far less in total, simply because their money spent more time multiplying.
The calculator above models a starting amount plus steady monthly contributions. It steps through every month: it grows your existing balance by that month's slice of the annual rate, then adds your contribution at the end of the month. Summing twelve months gives each row of the year-by-year table, so you can watch contributions and interest stack up side by side.
The formula & how we calculate it
For a one-time lump sum with no contributions, the classic compound interest formula is:
P = starting amount (principal)
r = annual interest rate (as a decimal, e.g. 0.07)
n = number of times interest compounds per year
t = number of years
Because you're also adding money every month, we don't use that single closed-form expression — instead we step through the timeline month by month, which keeps contributions and interest exact. First we convert your chosen compounding frequency into an equivalent monthly growth factor, then we apply it 12 times per year and add a contribution at the end of each month.
Worked example (the defaults above):
- Start with
P= $10,000, contribute $200/month, rater= 7%, monthly compounding (n= 12), for 20 years. - Monthly growth factor = (1 + 0.07 ÷ 12)(12 ÷ 12) = 1.0058333.
- Step through 240 months: each month, balance = balance × 1.0058333 + $200.
- Final balance ≈ $144,573.
- Total contributions = $10,000 + ($200 × 240) = $58,000, so interest earned ≈ $86,573.
- The effective annual yield (APY) at 7% compounded monthly is about 7.23%.
If the rate is 0%, the formula collapses to your starting amount plus all your contributions — there's simply no interest to add.
What affects how much you end up with
- Time horizon. The single most powerful lever. Compounding accelerates in the later years, so each extra year you stay invested adds disproportionately more than the first. Starting five years earlier can beat contributing far more later.
- Rate of return. Even a one- or two-point difference in annual return compounds into a large gap over decades. But higher expected returns usually come with more risk and bigger swings along the way.
- Contributions. Regular monthly deposits do most of the early work and feed the balance that interest later multiplies. Increasing your monthly amount, especially early on, has an outsized effect.
- Compounding frequency. Monthly or daily compounding earns a little more than annual, because interest is added to the balance sooner. The effect is real but small compared with rate, time and contributions.
- Inflation, taxes and fees. The result here is a nominal figure. Inflation reduces what that balance can actually buy, while taxes and investment fees quietly trim your real return. A 7% nominal return might be closer to 4% after inflation.
Glossary
- Principal
- Your starting amount — the money you begin with before any interest or new contributions. Interest is first calculated on this base.
- Compound interest
- Interest earned on both your principal and on previously earned interest. Each period's interest is added to the balance, so future interest is calculated on a larger amount.
- Compounding frequency
- How many times per year interest is added to the balance (annually, quarterly, monthly or daily). More frequent compounding produces a slightly higher effective return.
- APY / effective annual yield
- The real yearly return once compounding is included. At a 7% nominal rate compounded monthly, the APY is about 7.23%. It's always at least as high as the nominal rate.
- Contribution
- Money you add to the account on a regular schedule (here, monthly). Contributions are added on top of any growth and become part of the balance that compounds going forward.
- Time horizon
- How long the money stays invested. Longer horizons give compounding more cycles to work, which is why growth is so heavily back-loaded.
- Nominal vs. real return
- A nominal return ignores inflation; a real return subtracts it. This calculator shows nominal balances, so remember that future dollars buy less than today's.
Frequently asked questions
How much will $10,000 grow in 20 years?
It depends on your rate, contributions and compounding frequency. A $10,000 starting amount plus $200 a month at a 7% annual return, compounded monthly for 20 years, grows to about $144,573. Of that, $58,000 is money you put in ($10,000 plus $200 × 240 months) and roughly $86,573 is compound interest. Change the inputs above to match your own plan.
What is compound interest?
Compound interest is interest earned on both your original money and on the interest you've already earned. Because each period's interest is added to the balance, the next period earns interest on a slightly larger amount. Over time that "interest on interest" effect snowballs, and growth accelerates the longer you stay invested.
How often should interest compound?
More frequent compounding earns slightly more, because interest is added to the balance sooner and starts earning on itself. At a 7% nominal rate, annual compounding yields 7.00% a year, while monthly compounding yields about 7.23% and daily about 7.25%. The difference is real but far smaller than the impact of your rate, your contributions and your time horizon.
What's the difference between APR and APY?
APR (annual percentage rate) is the simple nominal yearly rate before compounding is taken into account. APY (annual percentage yield), also called the effective annual yield, is the real yearly return once compounding is included. At a 7% APR compounded monthly, the APY is about 7.23%. APY is always equal to or higher than APR, and the gap grows with more frequent compounding.
Does compounding really make that big a difference?
Yes — over long periods it dominates. In the default example you contribute $58,000 but end with about $144,573, meaning roughly $86,573 of the balance is interest. Most of that interest is earned in the later years, because the balance is largest then. That's why starting early, even with smaller amounts, usually beats starting later with more.
How is compound interest calculated?
The classic formula for a lump sum is A = P(1 + r/n)nt, where P is the starting amount, r is the annual rate, n is the number of times interest compounds per year and t is the number of years. When you add regular contributions, the cleanest approach is to step through month by month: grow the balance by the period's rate, then add that month's contribution. This calculator iterates 12 months per year so contributions and interest both show up correctly.
Should I invest a lump sum or contribute monthly?
If you already have the money and a long horizon, investing a lump sum gives it the most time to compound and historically wins on average. Contributing monthly (dollar-cost averaging) is what most people actually do as they earn, and it smooths out the price you pay over time. Many investors do both: invest a starting amount and keep adding to it. This calculator models exactly that — a starting amount plus steady monthly contributions.