Compound Interest Calculator
See how your money grows over time with compound interest. Calculate future value, total contributions, and total interest earned on your investments.
How to Use This Compound Interest Calculator
Our free compound interest calculator helps you project the future value of your savings and investments. Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods, often called "interest on interest." This powerful effect is what makes long-term investing so rewarding.
Step-by-Step Instructions
- Enter your initial investment -- the starting amount you have to invest.
- Enter your monthly contribution -- the amount you plan to add each month.
- Enter the annual interest rate -- the expected yearly return on your investment.
- Select the compound frequency -- how often interest is compounded (monthly, quarterly, annually, etc.).
- Enter the time period -- the number of years you plan to invest.
- Click "Calculate" to see your projected future value and growth breakdown.
The Power of Compound Interest
Albert Einstein reportedly called compound interest the "eighth wonder of the world." The longer your money compounds, the faster it grows. A $10,000 investment at 7% annual return becomes $19,672 in 10 years, $38,697 in 20 years, and $76,123 in 30 years -- without any additional contributions. Regular monthly contributions amplify this growth even further.
Frequently Asked Questions
What is compound interest?
Compound interest is interest that is calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which is only calculated on the principal, compound interest allows your investment to grow exponentially over time.
How does compound frequency affect my returns?
The more frequently interest is compounded, the more interest you earn. Daily compounding yields slightly more than monthly, which yields more than quarterly, and so on. However, the difference between daily and monthly compounding is typically small for most investment amounts.
What is a realistic interest rate to use?
Historical stock market returns average about 7-10% per year before inflation. High-yield savings accounts typically offer 4-5%. Bonds average 3-5%. Use a rate that matches your investment type and risk tolerance. Remember that past performance does not guarantee future results.
Does this calculator account for inflation?
This calculator shows nominal returns (before inflation). To estimate real returns, subtract the expected inflation rate (historically about 2-3% per year) from your interest rate. For example, use 4-5% instead of 7% for inflation-adjusted stock market projections.
How do monthly contributions affect growth?
Regular monthly contributions significantly boost your final balance through dollar-cost averaging. Even modest monthly additions compound substantially over time. For example, contributing $500 per month at 7% annual return for 30 years results in over $566,000 in total contributions and interest combined.