Compound Interest Calculator

Calculate investment growth with compound interest and monthly contributions.

Final Balance
$37,405
Total Interest
$15,405
Total Invested
$22,000
Growth Over Time
Y1
$11,962
Y2
$14,066
Y3
$16,322
Y4
$18,741
Y5
$21,336
Y6
$24,117
Y7
$27,100
Y8
$30,298
Y9
$33,728
Y10
$37,405
ContributionsInterest

Compound Interest Calculator — What It Does

Enter a starting principal, annual interest rate, compounding frequency, investment period, and optional monthly contribution. The calculator shows your final balance, total contributions, and total interest earned — plus a year-by-year growth chart so you can see compounding in action.

The Compound Interest Formula

Without contributions: A = P(1 + r/n)^(nt)

With monthly contributions: A = P(1+r/n)^(nt) + PMT × [((1+r/n)^(nt) − 1) / (r/n)]

  • P — Initial principal (starting amount)
  • r — Annual interest rate as a decimal (e.g. 7% = 0.07)
  • n — Compounding frequency per year (12 = monthly, 365 = daily)
  • t — Time in years
  • PMT — Regular contribution per period

The Power of Starting Early

The most impactful variable in compound growth is time. An investor who puts $5,000/year into the market from age 25–35 (10 years, $50k total) and then stops — assuming 7% annual return — will end up with more at age 65 than someone who invests $5,000/year from age 35–65 (30 years, $150k total). That is the compounding effect of time.

Common Mistakes

  • Confusing APR and APY — APR is the nominal rate; APY (Annual Percentage Yield) accounts for compounding and is slightly higher. Use APY for accurate projections.
  • Ignoring inflation — A 7% return with 3% inflation gives a real return of ~4%. Long-term projections should use real (inflation-adjusted) rates for meaningful purchasing power estimates.
  • Treating the rate as fixed — Market returns vary year to year. Use historical average returns (e.g. ~7% real for US equities) as a guide, not a guarantee.

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 (which only earns on principal), compounding causes exponential growth over time.
What is the compound interest formula?
A = P(1 + r/n)^(nt), where P is principal, r is annual interest rate (decimal), n is compounding frequency per year, t is years. With regular contributions (PMT): A = P(1+r/n)^(nt) + PMT × [((1+r/n)^(nt) − 1) / (r/n)].
How often should interest compound for maximum growth?
More frequent compounding means slightly more growth: annually < quarterly < monthly < daily < continuously. However, the difference between daily and monthly compounding is negligible for most scenarios. The interest rate matters far more than compounding frequency.
What is the Rule of 72?
The Rule of 72 is a quick mental math trick: divide 72 by the annual interest rate to estimate how many years it takes for an investment to double. At 6% annual return, money doubles in roughly 72 ÷ 6 = 12 years.
Should I account for inflation in my calculations?
For long-term projections, yes. To get the real return, subtract the inflation rate from your nominal rate. If your investment returns 7% but inflation is 3%, your real purchasing power grows at roughly 4% per year.