Compound Interest Calculator

Compound interest means you earn returns not only on the money you originally deposit but also on the interest that money has already earned. Each period, your balance is multiplied by the periodic rate, so the base that earns interest keeps growing. Over short periods the effect is small, but over decades it becomes the dominant driver of growth. In the default example, more than half of the final balance is interest rather than deposits. The earlier you start and the longer you stay invested, the more powerful the effect becomes.

More frequent compounding does increase your return slightly, because interest starts earning its own interest sooner. Daily compounding beats monthly, which beats annual, at the same stated rate. However, the difference is usually small compared with the two factors that dominate long-term growth: the interest rate itself and the number of years you stay invested. Do not choose an account purely for compounding frequency; focus on a competitive rate, low fees, and consistent contributions. This calculator lets you compare annual, quarterly, monthly, and daily compounding so you can see the modest difference for yourself.

Around 7% is a common long-run assumption for a diversified stock portfolio, roughly reflecting historical average returns after inflation. It is an assumption, not a promise. Actual returns vary widely from year to year, can be negative for extended periods, and depend on your asset mix, fees, and timing. Bond-heavy or cash portfolios typically return much less. For planning, it is often wise to test a lower rate as well to see how sensitive your results are. Use the rate field to model conservative and optimistic scenarios rather than relying on any single figure.

Contributing at the beginning of each period gives every deposit slightly more time to earn interest, so the final balance is marginally higher than contributing at the end. Over long horizons this timing difference adds up, though it is usually smaller than the effect of the amount you contribute or the rate you earn. This calculator lets you choose either timing. In practice, what matters most is contributing regularly and automatically; the exact day of the month is a minor optimization compared with simply staying consistent.

No. The projection assumes a constant rate of return and does not subtract taxes, account fees, or inflation. Real-world returns are reduced by fund expenses and, in taxable accounts, by taxes on interest, dividends, and gains. Inflation also erodes what your future balance can buy. If you want an inflation-adjusted view, enter a lower rate that reflects your expected return minus inflation. Because these factors vary by person and account type, the calculator leaves them to you rather than guessing. Treat the result as a gross estimate, not a guaranteed after-tax outcome.

Three levers control your final balance: how much you start with, how much you add each period, and how long you leave it invested. Increasing your regular contribution usually has the largest reliable impact because it is within your control, while chasing a higher return adds risk. Starting earlier is powerful because it gives compounding more time to work. Try raising the contribution or extending the time horizon in this tool to see the effect. If you have a specific target and deadline, the savings goal calculator works backward to the exact monthly amount you need.

Simple interest is calculated only on your original principal, so it grows in a straight line. Compound interest is calculated on the principal plus all previously earned interest, so it grows faster and faster over time, forming a curve rather than a line. Most savings accounts, investments, and loans use compounding. Over a year or two the two methods produce similar numbers, but over decades compounding pulls far ahead. This is why long-term investing rewards patience and why compounding is often described as the most important idea in personal finance. For a deeper walkthrough, see our guide on how compound interest works.