Compound Interest Calculator
Compounding is interest earning interest. Over a few years it is unremarkable; over a few decades it does most of the work. This calculator separates what you paid in from what the growth added, because that split is the whole point.
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Formula
Why compounding rewards time more than rate
The rate of return matters, but the number of years matters more, because the exponent sits on the time. Adding two percentage points to a return is helpful. Adding ten years is usually transformative. That is why the standard advice about investing early is not a platitude — it is what the formula does.
Try it: set twenty years and note the interest figure, then set thirty. The contributions rise by half, and the interest typically more than doubles.
Where the growth actually comes from
Early on, almost all of the balance is money you put in. There is a crossover point — usually somewhere between year twelve and year twenty at typical rates — where the accumulated interest overtakes the accumulated contributions. After that, the account is growing faster than you are funding it.
Compounding frequency matters less than people expect
Monthly compounding beats annual, but the gap is small compared with the effect of rate and time. Switching from annual to monthly at seven percent adds roughly a fifth of a percentage point of effective yield. Worth having, not worth optimising for.
A caution about the rate
A savings account rate is contractual. An investment return is an assumption, and real returns arrive unevenly — a decade of good years can be followed by a bad one at exactly the wrong moment. Treat any projection here as the middle of a wide range, not a promise.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original amount. Compound interest is calculated on the original amount plus all the interest already earned, so it accelerates.
What rate should I assume?
For a savings account, use the quoted APY. For long-term investing, many people model somewhere in the region of six to eight percent before inflation for a diversified stock portfolio, while acknowledging the real result will vary widely.
Does this account for inflation?
No, the figure is nominal. To see what it is worth in today's money, run the result through the inflation calculator, or use the investment calculator which shows a real-terms figure alongside.
Does it matter when in the month I contribute?
Barely. Contributing at the start rather than the end of each period gains you roughly one period of interest over the whole term.