How to use the Compound Interest calculator
- Enter your numbers. Fill in initial deposit, monthly contribution, annual interest rate, years, compounding.
- Read your results. Results update instantly. The headline shows the balance after 20 years; the breakdown and table below show the details.
How compound interest works
Compound interest means you earn interest on your interest. Each period, the interest earned is added to your balance, and the next period’s interest is calculated on the bigger total. Over long periods, compounding (not your contributions) does most of the work.
The formula
where P is the initial deposit, r the annual rate, n compounding periods per year, t years, PMT the monthly contribution and i the equivalent monthly rate. Contributions are added at the end of each month.
The Rule of 72
Divide 72 by your annual rate to estimate how many years it takes to double: at 7%, about 10 years.
Worked example
With these inputs: initial deposit$10,000; monthly contribution$300; annual interest rate7%; years20; compoundingMonthly.
The calculator gives a balance after 20 years of $196,665. Other results: total contributions$82,000, interest earned$114,665, initial deposit$10,000, doubling time (rule of 72)10.3 yrs.
What your results mean
The final balance is your deposits plus all compounded interest. The gap between total contributions and the ending balance is growth from interest, and it widens sharply in later years. That is why starting early matters so much.
Tips
- Small regular deposits matter more than chasing a slightly higher rate.
- Use an APY when comparing savings accounts; it already includes compounding.
- Remember inflation: a 4% return with 3% inflation is about 1% real growth.
Frequently asked questions
What is the compound interest formula?
A = P(1 + r/n)nt for a lump sum, where n is compounding periods per year and t is years. Regular deposits add a future-value-of-annuity term.
What is the rule of 72?
Divide 72 by the annual interest rate to estimate how many years money takes to double: about 10 years at 7%.
Does compounding frequency matter much?
A little: daily vs. monthly compounding at 5% differs by only a few dollars per $10,000 per year. Rate and time matter far more.
What rate should I use?
High-yield savings: the current APY. Stock index funds have historically averaged roughly 7%–10% before inflation, but returns vary widely year to year.
Is this APY or APR?
Enter the nominal annual rate and choose the compounding frequency; the result reflects the effective yield.
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