How compound interest works
With simple interest you earn the same amount every year on the money you put in. With compound interest the interest is added to the balance, and from then on it earns interest too. The growth curve bends upward: slowly at first, then faster every year. That is why time in the market matters more than the exact monthly deposit.
With a regular deposit or monthly contribution on top, every deposit grows for the time it stays invested. The calculator works through it month by month, so it can handle yearly or monthly deposits, deposits at the start or end of a period, and deposits that rise each year.
Time does most of the work
A one-time $10,000 at 7% a year, compounded monthly, with nothing added:
| After | Balance | Of which interest |
|---|---|---|
| 10 years | $20,097 | $10,097 |
| 20 years | $40,387 | $30,387 |
| 30 years | $81,165 | $71,165 |
Starting early beats saving more later. $200 a month for 30 years at 7% grows to about $243,994 from $72,000 deposited. Waiting 15 years and then saving twice as much, $400 a month, deposits the same $72,000 but ends with only about $126,785.
Daily, monthly or yearly compounding
The same $10,000 at 5% for 10 years with different compounding. The effective annual yield (APY) shows the difference in one number:
| Compounding | Balance | APY |
|---|---|---|
| Yearly | $16,289 | 5.00% |
| Quarterly | $16,436 | 5.09% |
| Monthly | $16,470 | 5.12% |
| Daily | $16,487 | 5.13% |
The rule of 72 gives a quick estimate of how long money takes to double: divide 72 by the rate. At 6% that is about 12 years, at 9% about 8. The calculator shows the exact doubling time for your rate, about 9.9 years at 7% compounded monthly.
How to use the compound interest calculator
- 1Enter what you start with, how much you add each month or year, the annual interest rate and how many years the money stays invested.
- 2Pick how often your account or fund compounds. Open the extra options to deposit at the start of each period, raise the deposits every year or see the result after inflation.
- 3Read the future value and the split into deposits and interest, follow the growth year by year, and copy the result or save the table as CSV.
Frequently asked questions
What is compound interest?
Interest that is added to your balance and then earns interest itself. In the first years the effect is small, but over decades it often makes up most of the final amount, which is why starting early matters more than the size of the deposits.
How often should interest compound?
More often is better for savers, but the difference between monthly and daily compounding is tiny. The bigger lever is the rate itself. Compare savings accounts by their APY, which already includes the compounding, and this calculator shows the APY for whatever you enter.
Should I deposit at the start or the end of the month?
Money deposited at the start of the month earns interest for that month too, so the result is slightly higher. If you invest right after payday, choose start. Most savings plans and bank formulas assume the end.
What return should I use for stocks or ETFs?
Nobody knows future returns. Broad stock market indexes have historically returned somewhere around 6 to 10 percent a year on average before inflation, with large swings in single years. Try a cautious and an optimistic rate to see a range, and treat the result as an illustration, not a promise.
Does this include taxes and fees?
No. Taxes on interest and investment fees lower the real result. To get closer, subtract the yearly fees of your fund from the rate, and set an inflation rate to see what the final amount is worth in today’s money.