What is compound interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. This means your money earns interest on interest, leading to exponential growth over time.

How often should interest compound?

More frequent compounding (daily vs annually) results in slightly more growth, but the difference is small. What matters most is your contribution amount, interest rate, and time horizon.

What is a realistic annual return rate?

The S&P 500 has historically returned about 10% annually before inflation (7% after). Savings accounts typically offer 4–5% APY. CDs range from 3–5%. Your actual rate depends on your investment choices.

How is compound interest different from simple interest?

Simple interest is calculated only on the original principal, so a $10,000 deposit at 5% simple interest always earns $500/year. Compound interest is calculated on principal plus previously earned interest, so the same deposit earns more each year as the balance grows. Over long periods the difference is enormous.

Why is starting early so important?

Because compound interest accelerates over time. The final years of a long time horizon produce by far the largest dollar gains. Money you invest in your 20s has decades to compound; money you invest in your 50s has only a few. Starting 10 years earlier can roughly double your final balance, even with smaller contributions.

Compound Interest Calculator

Calculate the future value of your savings with compound interest. Enter your starting amount, monthly contributions, interest rate, and time period to see how your money grows. View a year-by-year breakdown showing contributions vs interest earned.

Last updated: June 22, 2026Reviewed by the CalcMountain editorial team

About this calculator

Compound interest is the engine behind nearly every long-term wealth-building strategy. Unlike simple interest, which earns a fixed return only on your original principal, compound interest earns a return on both your principal and every dollar of interest you have already accumulated. That second part — earning interest on your interest — is what turns small, consistent contributions into significant balances over decades.

This calculator projects the future value of a starting balance plus optional monthly contributions, compounded at the frequency you choose. It shows you a year-by-year breakdown of how much of your final balance came from contributions versus interest earned, which is the cleanest way to see the compounding effect at work.

Use it to compare scenarios — a higher rate, a longer time horizon, an extra $100 a month — and to understand why "start early" is the single most repeated piece of investing advice. The math is unforgiving in both directions: a decade of compounding gained or lost can change a final balance by hundreds of thousands of dollars.

The compound interest formula

Future Value with regular contributions: FV = P(1 + r/n)^(nt) + C × [ ((1 + r/n)^(nt) − 1) / (r/n) ] Where: P = Initial principal (starting amount) C = Periodic contribution (per compounding period) r = Annual interest rate as a decimal (e.g. 0.07 for 7%) n = Number of compounding periods per year t = Time in years The first term grows your starting balance. The second term is the future value of an annuity — the sum of every contribution, each compounded forward to the end of the time period. Example: $10,000 starting, $500/month, 7% annual rate, 20 years, monthly compounding r/n = 0.07/12 ≈ 0.005833 nt = 240 Starting balance grows to ≈ $40,387 Contributions grow to ≈ $260,463 Total future value ≈ $300,850

Building your projection

Enter your starting balance — the amount already invested today, or 0 if you are starting from scratch.
Enter your monthly contribution. Even $100/month adds up dramatically over decades.
Enter an annual rate of return. Use 7% for a balanced stock-heavy portfolio (long-run average after inflation), 4–5% for a high-yield savings account or CDs, and 9–10% for an all-stock portfolio before inflation.
Enter the time horizon in years. The single biggest lever in this calculator — doubling the years usually more than quadruples the final balance.
Choose compounding frequency. Monthly is most common for savings/investment accounts; daily for some bank products; annually for some bonds.
Review the chart. The gap between the contributions line and the total balance line is the compounding effect — and it widens fastest in the final third of the timeline.

Growth scenarios worth studying

The cost of waiting 10 years

Person A invests $500/month from age 25 to 35 (10 years, $60,000 total) and then stops. Person B invests $500/month from age 35 to 65 (30 years, $180,000 total). Both earn 7% annual return. At age 65: Person A ends with ≈ $602,000 (despite contributing for only 10 years) Person B ends with ≈ $612,000 (after 30 years of contributions) Person A contributed one-third the dollars and finished about the same. That is what "time in the market" really means.

Small contribution, long horizon

Start: $0 Monthly contribution: $200 Annual return: 7% Time: 40 years Total contributed: $96,000 Final balance: ≈ $525,000 Interest earned: ≈ $429,000 About 82% of the final balance is interest, not contributions. The compounding effect overtakes your own savings somewhere around year 18 and never looks back.

Rate sensitivity

Start $10,000, contribute $500/month for 30 years: At 4% return: ≈ $379,000 At 7% return: ≈ $686,000 At 10% return: ≈ $1,279,000 A 6-percentage-point difference in return triples the outcome. Costs and fees matter — a 1% expense ratio on the same portfolio over 30 years can quietly erase 25% of your final balance.

Where compounding math helps most

Use this calculator for long-horizon planning: projecting a retirement balance, modeling a college savings plan, or comparing what different contribution levels mean for your future net worth.

It assumes a constant rate of return, which is fine for planning but not realistic for market-based investments. Real-world stock returns vary wildly year to year, and the sequence of returns matters (especially near the start and end of the time horizon). For a more conservative plan, use a lower assumed rate than the long-run average — many planners use 5–6% real (after-inflation) for stock-heavy portfolios.

For specific savings goals (e.g. "How much do I need to save monthly to reach $1M in 25 years?"), use the savings goal calculator, which solves the problem in the other direction.

Common compounding miscalculations

Using a nominal rate (pre-inflation) without adjusting for inflation. A 7% return with 3% inflation is really a 4% real return in today's dollars. Either use real rates throughout, or remember that your final balance buys less than you think.
Assuming the calculated return is guaranteed. Markets average a return, but in any given year the actual return can be −30% or +30%. The math here works for averages, not certainty.
Setting compound frequency too aggressively. The difference between monthly and daily compounding on a 7% return is tiny (a few basis points). Don't overweight this input.
Ignoring taxes. Investment returns in a taxable brokerage account are reduced by capital gains and dividend taxes. Use this calculator for tax-advantaged accounts (401(k), IRA, Roth) first.
Forgetting fees and expense ratios. A 1% annual fee compounds against you the same way the return compounds for you — over decades it can consume 20–30% of the balance.

Questions about compound interest

References & further reading

Compound interest explainer — U.S. Securities and Exchange Commission (Investor.gov)
The power of compound interest — FINRA
Historical S&P 500 returns — Macrotrends

Related investing calculators

Investment Returns Calculator

Calculate your potential investment returns over different time horizons.

Savings Goal Calculator

Find out how much to save each month to reach your financial goal.

ROI Calculator

Calculate return on investment including annualized returns and net gain.

Dollar-Cost Averaging Calculator

Compare dollar-cost averaging vs lump sum investing to see which strategy wins.

Simple Interest Calculator

Calculate simple interest on a principal amount over time.

CAGR Calculator

Calculate the Compound Annual Growth Rate of an investment.

Compound Interest Calculator

Inputs

Starting Amount

Monthly Contribution

Annual Interest Rate

Time Period (Years)

Compound Frequency

Results

Future Value

$300,851

Total Contributions

$130,000

Total Interest Earned

$170,851

Interest as % of Total

56.8%

Year-by-Year Breakdown

Year	Start Balance	Contributions	Interest	End Balance
1	$10,000.00	$6,000.00	$919.19	$16,919.19
2	$16,919.19	$6,000.00	$1,419.38	$24,338.58
3	$24,338.58	$6,000.00	$1,955.73	$32,294.31
4	$32,294.31	$6,000.00	$2,530.85	$40,825.16
5	$40,825.16	$6,000.00	$3,147.55	$49,972.70
6	$49,972.70	$6,000.00	$3,808.82	$59,781.53
7	$59,781.53	$6,000.00	$4,517.90	$70,299.43
8	$70,299.43	$6,000.00	$5,278.24	$81,577.68
9	$81,577.68	$6,000.00	$6,093.55	$93,671.22
10	$93,671.22	$6,000.00	$6,967.79	$106,639.02
11	$106,639.02	$6,000.00	$7,905.24	$120,544.25
12	$120,544.25	$6,000.00	$8,910.45	$135,454.70