How to use the compound interest calculator
- 1Enter your starting amount and how much you will add each month.
- 2Enter the yearly interest rate and the number of years.
- 3Choose how often interest is compounded.
- 4Read the final balance, then open the table for a year-by-year breakdown.
Interest on interest
With compound interest, each period's interest is added to the balance and earns interest itself. Over time this snowballs: in later years, interest can grow the balance more than your deposits do.
The formula
For a single amount: balance = principal × (1 + r ÷ n)^(n × years), where r is the yearly rate and n the number of compounding periods per year. With monthly deposits, the calculator adds each deposit at the end of the month and applies the equivalent monthly rate.
Compounding frequency
More frequent compounding gives a slightly higher effective annual rate. 5% compounded monthly is about 5.12% a year; compounded daily it is about 5.13%. The difference is small, so the rate and the time invested matter far more.
The rule of 72
Divide 72 by the yearly rate to estimate how many years it takes to double your money. At 6%, that is roughly 12 years.
Investment returns are not guaranteed and vary from year to year. A steady rate here is a simplification for planning.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount. Compound interest is also paid on interest already earned, so it grows faster.
What is APY or AER?
The annual percentage yield, or annual equivalent rate, is the yearly return including compounding. It is shown as the effective annual rate.
Does this include inflation?
No. To see growth in today's money, subtract the expected inflation rate from the interest rate.
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