DeluxeCalc

Compound Interest Calculator

See how your savings grow when interest compounds on itself year after year.

About this calculator

Compound interest is interest earned on both your original money and on the interest it has already earned. With simple interest, a balance grows by the same dollar amount every year. With compound interest, each period's growth is added to the balance, so the next period's growth is calculated on a larger number. Over short periods the difference is small, but over decades this "interest on interest" effect becomes the largest part of the final balance. This calculator projects how an initial deposit plus regular contributions could grow at a constant rate of return, and it separates the result into the money you put in and the growth it earned.

How to use this calculator

Enter an Initial Investment, which is the amount you start with (use 0 if you are starting from nothing). Choose a Contribution Frequency (weekly, biweekly, monthly, quarterly, or annually) and enter the amount you plan to add each time. Enter the Annual Interest Rate as a percentage, such as 7 for 7%. Enter the Compound Frequency as the number of times per year interest is compounded: 1 for annually, 4 for quarterly, 12 for monthly, or 365 for daily. Finally, enter the Time Period in years. The page starts with $10,000 initial, $500 a month, 7% a year, monthly compounding, 20 years, and 3% inflation. Results update immediately and the inputs are kept in the page address, so a scenario can be bookmarked or shared.

The results show Future Value (the projected ending balance), Total Contributions (your initial investment plus every contribution), Interest Earned (the difference between the two), and the future value in today's dollars. A rate comparison table shows the future value one and two percentage points either side of your rate. A stacked chart shows contributions and interest for each year, and a yearly breakdown table lists the balance, total contributed, and interest earned at the end of each year.

How the calculation works

The calculator steps through every contribution period of the time period. Because contributions and compounding can happen at different frequencies, it first converts your annual rate and compound frequency into an equivalent growth rate per contribution period. The formula is (1 + annual rate divided by compound frequency) raised to the power of (compound frequency divided by contributions per year), minus 1. For monthly contributions with monthly compounding this is simply the annual rate divided by 12. Each period, the contribution is added to the balance first, and then the whole balance grows by the periodic rate. That means every contribution earns a full period of growth in the period it is made. This repeats for every period, and the balance is recorded at the end of each year.

Worked example using the default values

$10,000 to start, $500 a month, 7% a year compounded monthly, for 20 years. Over that time you contribute $130,000 in total: the $10,000 initial amount plus 240 monthly payments of $500. The projected future value is about $302,370, so interest earned is about $172,370, which is more than everything you put in. The growth is uneven over time. After 10 years the balance is about $107,144, of which $70,000 is contributions and only about $37,144 is interest. In the second 10 years you contribute another $60,000, but the balance grows by about $195,000, because growth is now being calculated on a much larger base. Changing only the compound frequency shows how much that setting matters: with annual compounding the 20-year result is about $293,900, with quarterly compounding about $300,755, and with daily compounding about $303,164.

Interpreting the results

The most useful number is often the split between contributions and interest rather than the final balance itself. In the early years most of the balance is money you deposited. The point where the interest band in the chart becomes larger than the contributions band is when growth starts to do more of the work than saving. The yearly table also lets you see what the balance would be if you stopped at an earlier year, which is helpful for medium-term goals such as a home down payment.

Practical tips

Test a range of interest rates rather than a single number, since real investment returns vary from year to year. For a savings account or CD, use the stated annual percentage rate and the compounding frequency in the account terms. For stock or bond funds, there is no fixed compounding schedule; monthly compounding at an assumed average return is a reasonable approximation. Increasing the time period usually has a bigger effect than increasing the rate by a point, so try adding five years to see the impact of starting earlier. You can also enter a monthly contribution of 0 to see how a single lump sum grows on its own.

Limitations and common mistakes

The calculator assumes the same rate of return every year with no losses, which is realistic for a fixed-rate deposit but not for investments, whose returns rise and fall. The headline future value is in future dollars; the today's-dollars figure divides it by your inflation rate compounded over the period, which assumes inflation stays constant. The after-tax figure is a rough approximation for a taxable account, and no figure subtracts account fees or fund expense ratios. Contributions are added at the start of each period. A common mistake is entering the rate as a decimal, such as 0.07, which the calculator reads as 0.07%; enter 7 instead. Another is confusing compound frequency with contribution frequency: they are separate settings. The projection is an illustration of how compounding works, not a forecast or financial advice.

Advanced options

Annual Contribution Increase raises the regular contribution by that percentage at the start of each year, for example to follow pay rises. Additional Contributions are one-time deposits made at the start of a chosen year, such as a bonus. Inflation Rate sets how the future value is converted to today's dollars. Tax on Returns is an approximation for a taxable account: that percentage of each year's growth is paid as tax at the end of the year, so a lump sum grows at roughly the rate times (1 minus the tax rate). Real tax rules depend on the account type, holding period, and whether gains are realized, so treat the after-tax value as an estimate.

Frequently Asked Questions

More financial calculators