How to use it
- Enter the starting amount and the annual interest rate, for example 5 for 5%.
- Choose how many years and how often interest is compounded. Your bank or fund states this.
- Optionally enter a monthly deposit.
- Read the final balance and the year-by-year table showing how much came from deposits and how much from interest.
How it works
Compound interest means interest is added to the balance and then earns interest itself. For a single deposit the future value is A = P × (1 + r/n)^(n·t), where P is the starting amount, r the annual rate as a decimal, n the number of compounding periods per year and t the number of years. 10,000 at 5% compounded annually for 10 years grows to 10,000 × 1.05^10 = 16,288.95.
More frequent compounding gives slightly more interest because interest starts earning sooner. The effective annual rate shows this: 5% compounded monthly is (1 + 0.05/12)^12 − 1 = 5.116% a year. The gain from monthly to daily compounding is very small.
Monthly deposits are assumed to be made at the end of each month. To combine them with any compounding frequency, the calculator converts the rate to the equivalent monthly rate i = (1 + r/n)^(n/12) − 1 and adds PMT × ((1 + i)^(12·t) − 1) ÷ i. With monthly compounding, i is simply r/12. Some banks pay no interest on money deposited between two compounding dates, so their result can be slightly lower.
The results ignore taxes, fees and inflation and assume a constant rate. They illustrate the arithmetic and are not financial advice or a forecast of any investment.
Examples
A one-off deposit
10,000 at 5% for 10 years: compounded annually it grows to 16,288.95; compounded monthly to 16,470.09. The difference is the effect of compounding more often.
Saving every month
Starting from 0 and saving 200 a month at 4% compounded monthly for 20 years gives about 73,355. Of that, 48,000 is your own deposits and about 25,355 is interest.
Rule of 72 check
At 6% a year, money roughly doubles in 72 ÷ 6 = 12 years. The table confirms it: 1,000 compounded annually reaches 2,012.20 after 12 years.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount: 1,000 at 5% earns 50 every year. Compound interest is paid on the growing balance, so the yearly interest grows: 50, then 52.50, then 55.13, and so on.
Does compounding frequency make a big difference?
Less than most people expect. At 5%, annual compounding gives an effective rate of 5%, monthly 5.116% and daily 5.127%. The rate itself and the time invested matter far more.
What is the effective annual rate (APY or AER)?
It is the growth over one full year including compounding: (1 + r/n)^n − 1. Use it to compare accounts that compound at different frequencies.
Are deposits made at the start or the end of the month?
At the end. A deposit made at the start of each month would earn one extra month of interest, so the real result would be slightly higher.
Privacy
All calculations run in your browser. The amounts you enter are not sent or stored.