What compound interest means
Simple interest pays you only on your original deposit. Compound interest pays you on your deposit and on the interest already earned. Over short periods the difference is small, but over decades it becomes the dominant force in your balance. In the default example, after 20 years a large share of the ending balance is interest rather than money you deposited, and that share keeps rising the longer you leave it alone.
How to use the calculator
Enter a starting amount, how much you plan to add each month, an expected annual rate, the number of years, and how often interest compounds. The result shows the future value, how much you contributed in total, and how much came from interest. Open the yearly breakdown to see the balance at the end of each year, which is useful for checking milestones such as when you might reach $100,000.
Choosing a realistic rate
The rate you enter has a huge effect on the result, so pick it carefully. High-yield savings accounts and certificates of deposit pay a stated APY that changes with market interest rates. Stock market returns are not fixed: they vary widely from year to year and can be negative. If you are modeling investments, consider running a conservative, a middle, and an optimistic scenario rather than relying on one number. Remember that inflation reduces the real value of future dollars; you can use our inflation calculator to convert a future balance into today's purchasing power.
Why compounding frequency matters (a little)
For the same stated rate, more frequent compounding produces slightly more interest because interest starts earning interest sooner. The difference between monthly and daily compounding is usually tiny. When comparing accounts, look at the APY, which already includes the effect of compounding; our APR to APY calculator explains the conversion.
The power of time and consistency
Two habits matter more than finding the perfect rate: starting early and contributing consistently. Someone who saves for 30 years will usually end with far more than someone who saves twice as much per month for 15 years, because the early dollars have more time to compound. Automating a monthly transfer makes consistency easier. Try changing only the "Years" input in the calculator and watch how the interest portion grows disproportionately.
The rule of 72
A quick mental shortcut: divide 72 by the annual rate to estimate how many years it takes money to double. At 6%, money doubles roughly every 12 years; at 8%, about every 9 years. It is an approximation, but it is handy for sanity-checking any projection.
Taxes and fees
This calculator shows gross growth. In a taxable account, interest and dividends may be taxed each year, which lowers effective growth. Fund expense ratios and advisory fees also reduce returns; a 1% annual fee can consume a surprisingly large share of long-term growth. Tax-advantaged accounts such as 401(k)s and IRAs can help more of the compounding stay with you.
Formula used
Lump sum: A = P × (1 + r/n)n·t
With contributions, the calculator converts the nominal rate to an effective monthly rate i = (1 + r/n)n/12 − 1 and adds each monthly deposit at the end of the month: balance = balance × (1 + i) + deposit. For monthly compounding this equals the standard future-value-of-annuity formula FV = PMT × ((1 + i)N − 1) / i.
Frequently asked questions
Are contributions added at the start or end of each month?
At the end of each month. Contributions at the start of the month would produce a slightly higher result.
Can I use this for stock investments?
Yes as a rough projection, but real market returns are not constant. Treat the result as a scenario, not a prediction.
What is the difference between APR and APY here?
Enter the nominal annual rate and choose the compounding frequency. If you only know the APY, choose annual compounding and enter the APY.
Does this account for inflation or taxes?
No. It shows nominal pre-tax growth. Use the inflation calculator to adjust for purchasing power.
Keep planning
- 401(k) Retirement Calculator — project your 401(k) with employer match.
- Inflation Calculator — adjust future values for inflation.
- APR to APY Calculator — convert APR to APY.