Compound Interest Calculator
See how a lump sum plus regular monthly contributions grows over time when interest compounds. The clearest way to visualise why starting early beats saving more later.
Last updated: May 2026
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About this calculator
Compound interest is interest earned on both your original principal and the interest already accumulated, so your balance grows faster the longer it runs. This calculator combines a lump sum with ongoing monthly deposits. The principal grows by FV = P × (1 + r)^t, where P is the starting Principal, r is the annual rate as a decimal, and t is the number of years. The monthly contributions form an annuity that grows by PMT × ((1 + i)^n − 1) / i, where i is the monthly rate (annual rate ÷ 12), n is the number of months, and PMT is the Monthly Contribution. Adding the two gives your projected Future Value. The defining feature is exponential growth: because each period's interest joins the base for the next period, small differences in rate or time produce large differences in outcome — a 1% higher return sustained over decades can add tens of thousands of dollars. Edge cases matter: at a 0% rate the contributions simply sum to PMT × n with no growth, and a longer horizon always beats a higher contribution over short periods because of how compounding accelerates late. The model assumes a constant annual return and steady monthly deposits; real markets vary year to year, and it does not subtract inflation, fees, or taxes, so treat the figure as a smooth nominal projection rather than a guarantee.
How to use
Example 1 — $10,000 to start, $500 a month, 7% for 10 years. Enter Principal = 10000, Annual Rate = 7, Years = 10, Monthly Contribution = 500. The lump sum grows to 10000 × 1.07^10 = $19,671.51 and the deposits grow to about $86,542, for a Future Value of $106,213.92. Verify: you contributed $70,000 of your own money ($10k + $60k of deposits) and earned roughly $36,000 in growth. Example 2 — $5,000 to start, $300 a month, 6% for 20 years. Enter Principal = 5000, Annual Rate = 6, Years = 20, Monthly Contribution = 300. The result is $154,647.95. Verify: total contributions are $77,000 ($5k + $72k), so compounding roughly doubled the money over two decades — a clear illustration of long horizons at work.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal, so it grows linearly — the same dollar amount is added each period. Compound interest is calculated on the principal plus all previously earned interest, so it grows exponentially and accelerates over time. Over short periods the two are close, but over decades the gap becomes enormous: compounding is what turns modest savings into large balances. Almost all savings accounts, investments, and loans use compounding, which is why understanding it is so important. The longer the money stays invested, the more dramatically compound interest pulls ahead of simple interest.
How much does compounding frequency matter?
More frequent compounding produces a slightly higher balance because interest is credited and starts earning sooner, but the effect is smaller than most people expect. The jump from annual to monthly compounding is noticeable, while the jump from monthly to daily is tiny, approaching a ceiling set by continuous compounding. This calculator compounds the contributions monthly, which matches how most real accounts work. The rate itself and the time horizon are far more powerful levers than frequency. So focus first on earning a good return for a long time, and treat compounding frequency as a minor refinement.
Why does starting early matter more than saving more?
Because compounding rewards time exponentially, money invested earlier has more years to multiply, and those extra years do the heaviest lifting. A saver who invests for ten years and then stops can end up ahead of someone who starts ten years later and contributes for far longer, simply because the early money compounded longer. The last decade before a goal generates more growth than the first, since the balance is largest then. This is why financial advisers stress beginning as soon as possible, even with small amounts. Time in the market, not the size of any single contribution, is the dominant factor.
Does this calculator account for inflation and taxes?
No — it produces a nominal figure that ignores inflation, fees, and taxes, so the real purchasing power of the final balance will be lower than it appears. To see today's-dollars value, either enter an inflation-adjusted (real) return, roughly your expected return minus expected inflation, or divide the result by (1 + inflation)^years afterward. Investment fees also compound against you and can meaningfully reduce the outcome, so subtract them from your assumed return. Taxes depend on the account type — tax-advantaged accounts like IRAs or 401(k)s change the picture significantly. Treat the output as a gross projection and adjust for these factors when planning.
When should I NOT rely on this projection?
Avoid treating it as a guarantee, because it assumes a single fixed annual return every year, whereas real investments are volatile and the sequence of good and bad years affects outcomes — especially once you begin withdrawing. It is also the wrong tool if your contributions are irregular, if you plan to make withdrawals, or if you need to model a specific tax-advantaged account's rules. Do not use an optimistic historical average as a certainty; run several rate scenarios instead. And remember it ignores inflation by default, so a large nominal number can be misleading. Use it for forward growth estimates, not for retirement-drawdown or guaranteed planning.