Compound Interest Calculator
See how your initial deposit and monthly contributions grow over time.
How does compound interest work?
Compound interest means you earn interest not only on your original principal, but also on the interest that has already been added to your balance. The more frequently interest compounds — monthly versus annually, for example — the faster your balance grows, because each compounding period's interest gets added to the base for the next calculation.
Why monthly contributions matter
Adding a fixed amount every month, even a small one, can dramatically increase your long-term balance because each new contribution starts earning its own compound interest immediately. Over 20 or 30 years, consistent contributions often outweigh the size of your initial deposit.
Choosing a compounding frequency
Banks and investment accounts compound interest on different schedules. Monthly compounding is common for savings accounts, while some investments compound quarterly or annually. Use the dropdown above to compare how compounding frequency changes your projected future value.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on your original principal, so it grows at a constant rate every period. Compound interest is calculated on your principal plus any interest already earned, so your balance grows faster and faster over time as interest starts earning its own interest.
What is the Rule of 72?
The Rule of 72 is a quick mental shortcut: divide 72 by your annual interest rate to estimate how many years it will take your money to double. For example, at a 6% return, your investment would roughly double in 72 / 6 = 12 years.
Does compounding frequency (daily, monthly, annually) really matter?
Yes, though the effect is smaller than most people expect. More frequent compounding — daily versus annually, for instance — means interest gets added to your balance more often, slightly increasing your effective annual return, but the bigger drivers of growth are your rate, time horizon, and contribution amount.
How much should I save monthly to reach a specific goal?
It depends on your time horizon and expected rate of return — the earlier you start, the less you need to contribute each month because compounding has more time to work. Try entering your target future value's timeframe above and adjust the monthly contribution field until the future value matches your goal.
What is the best age to start investing?
The best age is as early as possible, because compound interest rewards time more than almost any other factor — someone who invests smaller amounts in their 20s often ends up with more than someone who invests larger amounts starting in their 40s. That said, starting later is still far better than not starting at all.
How does compound interest work in retirement accounts like a 401(k) or IRA?
Inside a 401(k) or IRA, your contributions and any employer match grow tax-deferred (or tax-free in a Roth), so you avoid paying taxes on gains each year, letting the full compounding effect work uninterrupted for decades. This tax advantage, combined with consistent contributions, is a major reason retirement accounts can grow so much larger than a comparable taxable account.
Why do consistent monthly contributions matter more than a large lump sum later?
Every monthly contribution starts compounding from the moment it's deposited, so contributions made early in your timeline have far more time to grow than money added later. This is why steady, automatic monthly deposits often build more wealth over 20-30 years than waiting to invest a bigger amount all at once.