Compound Interest Calculator
Calculate how your investment grows over time with compound interest and optional regular contributions.
Growth Over Time
Yearly Breakdown
| Year | Balance | Interest Earned | Contributions |
|---|---|---|---|
| 1 | 11,744.62 | 544.62 | 1,200.00 |
| 2 | 13,578.50 | 633.88 | 1,200.00 |
| 3 | 15,506.20 | 727.70 | 1,200.00 |
| 4 | 17,532.53 | 826.33 | 1,200.00 |
| 5 | 19,662.53 | 930.00 | 1,200.00 |
| 6 | 21,901.50 | 1,038.97 | 1,200.00 |
| 7 | 24,255.02 | 1,153.52 | 1,200.00 |
| 8 | 26,728.95 | 1,273.93 | 1,200.00 |
| 9 | 29,329.46 | 1,400.51 | 1,200.00 |
| 10 | 32,063.01 | 1,533.55 | 1,200.00 |
How It Works
- 1
Set investment parameters
Enter initial investment, annual rate, time period, and compounding frequency.
- 2
Add monthly contributions
Optionally enter regular monthly contributions to see accelerated growth.
- 3
Analyze the growth breakdown
Review future value, total contributions, and interest earned in the yearly breakdown table.
Common compound interest mistakes
Comparing APR and APY as if they were the same. APY includes compounding frequency; APR usually does not.
Assuming a steady annual return. Market investments fluctuate, so a constant 7% input is a planning estimate, not a promise.
Forgetting contribution timing. Monthly deposits made at the beginning of each period grow slightly more than deposits made at the end.
Ignoring fees and taxes. A 1% fee or tax drag compounds in the wrong direction over long time spans.
Understanding Compound Interest
Albert Einstein reportedly called compound interest the eighth wonder of the world. Unlike simple interest, compound interest earns 'interest on interest': each period's earnings are added to the principal. The formula A = P(1 + r/n)^(nt) captures this: P is the initial investment, r the annual rate, n the compounds per year, and t the years. The Rule of 72 provides a quick shortcut: divide 72 by your annual return to estimate doubling time (at 8%, money doubles in ~9 years). The calculator extends this with monthly contributions, which is where the totals climb. Starting with $10,000 at 7% and adding $500 a month yields about $610,000 after 30 years, of which only $190,000 is contributions and $420,000 is compound growth.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, it allows your investment to grow exponentially over time, earning 'interest on interest'.
How often should I compound?
More frequent compounding produces slightly higher returns. Daily compounding yields the most, but the difference between monthly and daily is small for typical investment horizons. Most savings accounts and investments compound monthly or daily.
What is the formula for compound interest?
A = P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate (decimal), n is compounds per year, and t is time in years. With regular contributions: A = P(1 + r/n)^(nt) + PMT x ((1 + r/n)^(nt) - 1) / (r/n).
What is the Rule of 72?
The Rule of 72 estimates how many years it takes to double your money: divide 72 by your annual interest rate. For example, at 6% annual return, your investment doubles in approximately 72 / 6 = 12 years.
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