Compound interest means you earn interest on previous interest, so growth accelerates over time. The longer money stays invested and the more often interest compounds, the larger the final balance.
How to use it
- Initial deposit: the lump sum you start with.
- Monthly contribution: the amount you add at the end of each month.
- Annual rate and compounding: as quoted by your bank or an expected investment return.
- Time: in years or months.
Enter a target balance in the Future value field to find how long you need to save.
Compounding frequency matters less than time
Moving from annual to daily compounding adds only a little; adding five more years usually adds far more. The rule of 72 gives a quick check: divide 72 by the rate to estimate the years needed to double money.
Limitations
Real investments do not grow at a constant rate, and taxes, fees and inflation reduce real returns. Treat the result as a projection, not a guarantee.
Inputs explained
| Field | What to enter |
|---|---|
| Initial deposit | Amount in your currency |
| Monthly contribution | Amount in your currency |
| Annual interest rate | In % |
| Compounding | Choose one: Annually, Quarterly, Monthly, Daily |
| Time | Units: years, months |
What each result means
- Total deposits = [Initial deposit] + [Monthly contribution]×12×[Time]
- Interest earned = [Future value] – [Total deposits]
Example values
How the main result changes when Time changes and everything else stays at the example values above:
| Time (years) | Future value |
|---|---|
| 5 | 28,494.83 |
| 7.5 | 40,463.36 |
| 10 | 54,713.58 |
| 12.5 | 71,680.46 |
| 15 | 91,881.93 |
| 20 | 144,572.72 |
Formula
FV = P(1 + r/n)^(n·t) + C × ((1 + i)^(12t) − 1) ÷ ii = (1 + r/n)^(n/12) − 1 (effective monthly rate)Worked example
Start with 10,000, add 200 per month, earn 7% compounded monthly for 10 years.
Lump sum: 10,000 × (1 + 0.07/12)^120 ≈ 20,097.
Contributions: 200 × ((1.0058333)^120 − 1) ÷ 0.0058333 ≈ 34,617.
Future value ≈ 54,714; deposits 34,000; interest earned ≈ 20,714.
Key terms
- Compounding period
- How often earned interest is added to the balance.
- Future value
- The projected balance at the end of the period.
- Effective rate
- The true yearly or monthly growth rate after compounding.
- Rule of 72
- Shortcut: years to double ≈ 72 ÷ annual percentage rate.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original principal; compound interest is also paid on interest already earned.
When are contributions added?
At the end of each month, a common and conservative assumption.
Can I use a negative rate?
Yes, to model a declining value, for example inflation eroding cash.
How do I find how long to reach a goal?
Type the goal into the future value box; the time field is solved for you.
What formula does the Compound Interest Calculator use?
FV = P(1 + r/n)^(n·t) + C × ((1 + i)^(12t) − 1) ÷ i.
Can I work backwards from the result?
Yes. Type the result you want into Future value and the calculator finds the matching time.