Compound Interest Calculator
Find out how much your savings or investment can grow when interest earns interest.
How compound interest works
With compound interest, the interest you earn is added to your balance, and the next round of interest is calculated on that bigger amount. Early on the effect looks small. Over ten or twenty years it becomes the main reason a balance grows.
The formula
For a lump sum the balance is A = P × (1 + r ÷ n)n × t. P is the starting amount, r is the yearly rate as a decimal (5% is 0.05), n is how many times a year interest is added, and t is the number of years. Monthly deposits are treated as arriving at the end of each month and growing at the same effective rate.
Worked example
Start with 10,000 at 5% a year, added monthly, and deposit 200 a month for 10 years. The balance reaches about 47,527: the 10,000 grows to about 16,470 and the deposits grow to about 31,056. You paid in 34,000 in total, so roughly 13,527 of the final balance is interest.
Getting realistic results
- Use the rate your account or fund actually pays, after fees.
- Interest is often taxed, and this calculator does not include tax.
- Inflation reduces what a future balance can buy, so compare the result with the inflation calculator.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original amount. Compound interest is calculated on the original amount plus interest already earned, so it grows faster over time.
Does compounding more often make a big difference?
It helps, but less than most people expect. At the same yearly rate, moving from yearly to monthly compounding adds a small amount; the rate and the time you leave the money invested matter far more.
Is the rate I enter the APY or the APR?
Enter the nominal yearly rate and pick how often it is added. If you only know the APY (the effective yearly rate), choose yearly compounding and enter the APY.
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