Compound Interest Calculator
What is Compound Interest?
Compound interest is interest earned on both your original money and the interest it has already generated. Over time this creates exponential growth - the famous "interest on interest" effect that makes investing early so powerful. This compound interest calculator shows exactly how your investment grows with monthly contributions.
A worked example shows why time matters more than the amount. Invest $5,000 up front and add $200 every month at a 7% annual return. After 10 years the balance is about $44,665, built from $29,000 in contributions and roughly $15,665 of pure growth. Stretch the same plan to 25 years and the picture changes completely: the balance reaches about $190,600, of which about $125,600 came from growth rather than deposits. You contributed barely more than twice as much, yet the ending balance is more than four times larger. That gap is compounding doing the work your contributions never could.
Four inputs drive the whole projection. Start with the lump sum you have today, then the amount you can add every month - even $50 counts. Next, choose an expected annual return; common long-term planning rates are 6-8% for stock index funds. Finally, set the number of years you will leave the money alone. The calculator assumes monthly compounding with contributions added at the end of each month, then reports the future value, your total contributions, and the interest earned in between. The split between what you deposited and what the market added is the part worth staring at.
Anyone weighing whether small monthly amounts are worth the trouble will find the answer here: they are. The tool suits retirement planning, college savings, or deciding whether to invest a windfall instead of spending it. Its honesty depends on your assumptions, though. Real markets swing far more than a smooth 7% line - some years are negative - and the projection ignores taxes, fees and inflation, all of which trim the final figure. It also assumes you never withdraw and never miss a contribution. Use a conservative return, treat the result as a central scenario rather than a promise, and revisit the numbers once a year.
Frequently Asked Questions
What is the formula for compound interest?
A = P(1 + r/n)^(nt) for a lump sum, where P is principal, r is the annual rate, n is compounding periods per year and t is years. With regular monthly contributions, the future value formula adds a payment term: PMT × ((1 + i)^m - 1) / i.
How often is interest compounded?
It depends on the account. Savings accounts typically compound daily or monthly, CDs can compound monthly or quarterly, and investments grow continuously in theory. More frequent compounding means slightly more growth, since interest is added to your balance sooner.
How long does it take to double my money?
Use the Rule of 72: divide 72 by your annual return. At 7%, money doubles roughly every 10.3 years; at 10%, about every 7.2 years. The Rule of 72 is a quick estimate, not an exact calculation.
Does compound interest work against you on debt?
Yes - the same mathematics accelerates credit card debt at high APRs. A card balance compounding daily at 22% grows as relentlessly as a strong investment return, which is why paying down high-APR debt often beats investing the same dollars.
How does inflation affect compound growth?
Inflation shrinks what your future balance will buy. A common adjustment is to plan with a real return - nominal return minus inflation - so 7% nominal becomes roughly 4-5% real. Your purchasing power grows at the real rate, not the headline one.
Should I invest a lump sum or spread it monthly?
Mathematically, a lump sum invested earlier compounds longer and usually ends ahead. Monthly contributions fit paychecks, smooth out market swings and are far easier to sustain, so most people do both: invest windfalls at once and contribute on schedule every month.