Compound Interest Calculator
At 7% annual return, $10,000 compounds to about $20,096 in 10 years — and over 30 years it grows to roughly $76,123, with $66,123 of it pure interest. Add monthly contributions and growth accelerates dramatically. Enter your numbers to see your projection.
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How it works
Compound interest is interest on interest: each period, interest is added to the balance, and the next period's interest is calculated on the larger balance. The core formula is A = P × (1 + r/n)^(n×t), where P is principal, r is the annual rate, n is compounding periods per year, and t is years. Monthly contributions add a separate annuity term.
Worked example
Invest $10,000 at 7% compounded monthly for 10 years: A = 10,000 × (1 + 0.07/12)^120 ≈ $20,096. Add $200/month and the result jumps to roughly $55,000 — contributions of $34,000 earned about $21,000 in interest on top.
Assumptions
- Constant rate: Assumes a fixed annual return — real returns fluctuate
- No taxes or fees: Taxes and account fees reduce actual returns
- Contributions: Monthly contributions are assumed to be made at the same time as compounding
What the result means
The interest-earned figure shows how much compounding contributed vs. what you actually put in. The key lesson: time matters more than rate — a 20-year-old investing $100/month will likely end up with more than a 40-year-old investing $300/month, purely because of longer compounding. Use this to compare starting earlier vs. contributing more.
Frequently asked questions
How does compound interest work?
Interest is added to your balance, and the next period's interest is calculated on the new, larger balance. Over time this grows exponentially — that's why starting early matters so much.
What's the formula for compound interest?
A = P × (1 + r/n)^(n×t). P is the starting amount, r the annual rate as a decimal, n the compounding periods per year, and t the years. Monthly contributions add a separate term.
How often does interest compound?
It depends on the account: savings accounts often compound daily or monthly; bonds annually; some investments effectively compound continuously. More frequent compounding means slightly more growth.
Is compound interest better than simple interest?
Yes — simple interest is only ever calculated on the original principal, while compound interest grows on previously earned interest. Over decades the difference is enormous.
What return should I use?
A common long-term stock market assumption is 7-8% annually after inflation (the S&P 500 has historically returned about 10% nominal). Savings accounts pay much less. Use a range to see best- and worst-case.
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Projections are estimates for informational purposes only and are not financial advice. Returns are not guaranteed; investments can lose value. Consider taxes, fees, and inflation.