How to use the compound interest calculator
- Enter your initial deposit and how much you will add each month.
- Enter the annual interest rate and how often interest compounds.
- Choose the number of years. Add an inflation rate to see the result in today’s money.
- The year-by-year table shows how much of each year’s growth comes from your deposits and how much from interest.
The formulas
Lump sum: A = P × (1 + r ÷ n)^(n × t) Monthly rate: i = (1 + r ÷ n)^(n ÷ 12) − 1 Contributions: FV = PMT × ((1 + i)^N − 1) ÷ i (end of month) × (1 + i) if paid at the start of the month APY = (1 + r ÷ n)^n − 1 Rule of 72: years to double ≈ 72 ÷ rate
Worked examples
- Lump sum: $10,000 at 5% compounded monthly for 10 years → 10,000 × (1 + 0.05/12)^120 = $16,470.09.
- Monthly saving: $200 a month at 7% for 30 years → $243,994. You put in $72,000; the other $171,994 is interest.
- Starting earlier: paying at the start of each month instead of the end adds one extra month of interest to every deposit — $245,417 in the same example.
The power of time
| $200 a month at 7% | Deposits | Balance | Interest share |
|---|---|---|---|
| 10 years | $24,000 | $34,617 | 31% |
| 20 years | $48,000 | $104,185 | 54% |
| 30 years | $72,000 | $243,994 | 70% |
| 40 years | $96,000 | $524,963 | 82% |
Doubling the time more than doubles the result because the interest itself earns interest. Starting ten years earlier often matters more than saving twice as much.
Compound vs simple interest
With simple interest you earn only on the original deposit, so growth is a straight line. With compound interest the growth curve bends upward. Savings accounts, CDs, bonds held in funds and reinvested stock dividends all compound. Debt compounds too: a credit card balance at 24% APR roughly doubles in about three years if left unpaid, which is why paying off high-interest debt is usually the best “investment” available.
Things to keep in mind
- Inflation reduces what the future balance can buy. At 3% inflation, $100 in 20 years buys what about $55 buys today.
- Taxes: interest in ordinary savings accounts is taxable each year. Tax-advantaged accounts such as 401(k)s, IRAs and Roth IRAs let growth compound with fewer taxes.
- Fees: a 1% annual fund fee can shrink a 30-year balance by roughly a fifth to a quarter.
- Investment returns vary: stock market returns are not a fixed rate. Use a conservative figure for planning.
Use the savings goal calculator to work backwards from a target amount to the monthly saving you need.