Compound Interest Calculator
Visualize how your money grows over time with compounding and regular monthly contributions.
Future Balance
Compound interest is the closest thing to magic in personal finance, and the reason is genuinely counterintuitive: the money you contribute matters far less than the time you leave it alone. This calculator shows the split — how much you put in, versus how much the growth put in.
Why time beats amount
Simple interest pays you on your original deposit. Compound interest pays you on your deposit plus every bit of interest it has already earned. Your returns start earning returns, and that recursion is where the whole effect lives. The consequence is a curve, not a line. Someone who invests $200 a month from age 25 to 35 and then stops — $24,000 total — will typically end up with more at 65 than someone who invests $200 a month from 35 to 65, contributing $72,000. Three times the money, less result. The first person bought thirty extra years of compounding. This is why 'start now' is the only universally correct financial advice. Not because the amount matters, but because you cannot buy time back later at any price.
The formula
Lump sum: FV = P × (1 + r/n)^(n×t)
Monthly contributions:
FV = PMT × [((1 + i)^m − 1) ÷ i]
Where:
P = initial PMT = monthly amount
r = annual rate n = compounds/year
i = monthly rate m = total months
Example: $10,000 + $500/month, 8%, 20 years
Contributed = $130,000
Final value = $343,000
Growth = $213,000Notice the split in that example: you contributed $130,000 and the compounding contributed $213,000. Past a certain point the growth outpaces you entirely — and that crossover is what you are actually investing for.
Making compounding work
- 1Start now with whatever amount you can. $50 a month starting today beats $500 a month starting in ten years, over a long enough horizon. That is not motivational framing — it is what the exponent does.
- 2Do not interrupt it. Withdrawing early does not just cost you the amount — it costs you everything that amount would have become. Pulling $10,000 out at 30 costs you roughly $100,000 at 65.
- 3Fees compound too, in the wrong direction. A 1% annual fee versus 0.1% sounds trivial and consumes roughly a quarter of your final balance over 30 years. Check what your fund charges.
- 4Automate the contribution. Compounding rewards consistency far more than optimisation. A boring automatic transfer beats a clever strategy you abandon after eight months.
- 5Be honest about the rate. 7% is a reasonable long-term real return for broad equities. Modelling 20% produces a beautiful chart and a plan that will disappoint you.
Frequently asked questions
What return rate should I use?
For broad stock market index funds, 7–10% nominal is the long-run historical range; around 7% after inflation. For bonds, 3–5%. For a savings account, whatever it currently pays. Being conservative here means being pleasantly surprised rather than badly disappointed.
Does compounding frequency matter much?
Less than people think. Daily versus monthly compounding at 8% is a difference of about 0.03% per year. Annual versus monthly is more meaningful. Your contribution amount and your time horizon dwarf both.
What is the rule of 72?
A mental shortcut: divide 72 by your annual return to estimate the years to double. At 8%, money doubles in about 9 years. At 12%, about 6 years. It is remarkably accurate for rates between 5% and 15%.
Does this account for inflation?
No — these are nominal figures. If you want purchasing power in today's money, subtract inflation from your return rate. Using 5% instead of 8% gives you a rough real return. The number is less exciting and much more honest.
Should I invest a lump sum or monthly?
Statistically, a lump sum wins about two thirds of the time — more time in the market. But most people do not have a lump sum; they have a salary. Monthly contributions are how compounding actually happens for most of us, and consistency matters more than optimisation.