Compound Interest Calculator
Calculate how a principal (plus optional monthly contributions) grows with compound interest over time.
How to use the Compound Interest Calculator
- Enter the initial principal and the annual interest rate.
- Choose how often interest compounds, from annually to daily.
- Set the number of years, and add a monthly contribution if you plan to keep saving.
- Compare the final balance with the total contributed; the gap between them is the interest earned.
About the Compound Interest Calculator
Compound interest is interest calculated on both the original principal and the interest already earned, which is why savings and investments grow faster over time than simple interest would suggest. This calculator uses the standard formula A = P × (1 + r/n)ⁿᵗ, where P is the principal, r is the annual interest rate, n is how many times per year interest compounds, and t is the number of years — with annually, semi-annually, quarterly, monthly, and daily compounding all supported.
It also supports an optional recurring monthly contribution, simulated period by period at the exact effective rate your chosen compounding frequency implies, so adding regular deposits — like a monthly transfer into a savings account — is reflected accurately in the final balance, not just the growth of the initial lump sum.
Worked example
Example: a $10,000 principal at a 5% annual interest rate, compounded monthly, over 10 years with no additional contributions grows to a final balance of $16,470.09 — $6,470.09 of that is interest earned, on top of the original $10,000 principal.
How contributions are added
Each month, the balance grows by the monthly rate equivalent to your chosen compounding frequency, and then that month's contribution is added. Contributions are made at the end of each month, so each one starts earning interest the following month — the same timing as a typical automatic transfer on payday. With no contributions, the result is exactly the standard formula A = P × (1 + r/n)ⁿᵗ.
Regular contributions are the real engine
Over long periods, regular deposits often matter more than the starting amount. Saving $200 a month for 30 years at 7% (compounded monthly) with no initial deposit grows to about $243,994, even though only $72,000 was paid in. Starting with $10,000 as well brings the total to about $325,159. The longer the time horizon, the larger the share of the final balance that comes from interest rather than your own money.
Rules of thumb and caveats
- Rule of 72: divide 72 by the annual rate to estimate how many years money takes to double. At 6% that's about 12 years (the exact figure is 11.9).
- APY vs APR: banks often quote APY, which already includes compounding. A 5% rate compounded monthly is an APY of 5.116%. If you enter an APY here, choose annual compounding to avoid counting the compounding twice.
- Inflation: subtract expected inflation from the rate to see growth in today's money. A 7% return with 3% inflation is roughly 4% in real terms.
- Investments aren't savings accounts. Stock market returns vary year to year, so a fixed rate here shows a smoothed average, not a forecast. Fees and taxes also reduce the real result.
Frequently asked questions
- How does compounding frequency affect the final balance?
- More frequent compounding earns slightly more, since interest is calculated and added to the balance more often, which then itself starts earning interest sooner. The difference between, say, monthly and daily compounding is usually small at typical savings rates, but it grows with higher rates and longer time horizons.
- What's the difference between compound interest and simple interest?
- Simple interest is calculated only on the original principal for the entire term, so it grows linearly. Compound interest is recalculated on the running balance — principal plus all interest earned so far — so it grows exponentially, which is why compound interest produces a larger final balance over long periods.
- Do the monthly contributions get compounded too?
- Yes. Each monthly contribution is added to the running balance and then continues earning interest at the same effective rate as the principal for the rest of the time horizon, exactly like a real recurring deposit into an interest-bearing account.
- Why is the 'total contributed' number different from just the principal?
- Total contributed adds up the original principal plus every monthly contribution made over the full term. It's shown separately from the final balance so you can see exactly how much of the final balance came from your own money versus interest actually earned.