Compound Interest Calculator
See how your savings grow with compound interest over time, including regular contributions.
How this is calculated
A = P(1 + r/n)^(nt) + PMT × [(1 + r/n)^(nt) − 1] / (r/n)
Frequently Asked Questions About Compound Interest Calculator
Compound interest is the process of earning returns on your initial investment and the accumulated interest. This calculator shows how your money grows exponentially over time with regular monthly contributions and different compounding frequencies.
What is the difference between compound and simple interest?
Simple interest is calculated only on your principal amount, while compound interest is calculated on both your principal and previously earned interest. Compound interest leads to faster growth because you earn "interest on interest," which is why this calculator shows significantly higher results over long periods.
How often should interest compound for the best returns?
More frequent compounding (daily vs annually) produces slightly higher returns because interest is calculated and added more often. However, the difference between monthly and daily compounding is typically small, while the difference between annual and monthly is more significant. Choose based on your actual investment account terms.
Does adding regular monthly contributions really make a difference?
Yes, significantly. Regular contributions dramatically increase your total returns because each new deposit also earns compound interest. Over 20 years, monthly contributions can often produce more growth than the initial investment alone, making it one of the most important factors in long-term wealth building.
What interest rate should I use in the calculator?
Use the annual percentage rate (APR) or yield offered by your savings account, investment account, or bond. Be realistic—savings accounts typically offer 4-5% currently, while stock market investments average 7-10% historically, though past performance doesn't guarantee future results.
How long does it take for compound interest to make a big difference?
Compound interest accelerates over time, with most of the growth happening in later years. After 10-15 years of consistent contributions, the "interest on interest" component becomes substantial. This is why starting early is so powerful—time is your biggest advantage in wealth building.
Can I use this calculator for different types of investments?
Yes, this calculator works for savings accounts, CDs, bonds, index funds, and other investments. The key is that you need a realistic estimate of your annual return rate. Different investments have different return rates—use historical averages or your account's stated rate for accuracy.