See how compound interest grows your investments over time. Enter your initial investment, monthly contributions, and expected return for year-by-year projections.
Albert Einstein reportedly called compound interest the "eighth wonder of the world." A $10,000 investment with $200/month at 7% annual return grows to over $138,000 in 20 years — even though total contributions are only $58,000. The remaining $80,000+ is pure compound interest. Starting early makes an enormous difference: money invested in your 20s has decades to compound, while money invested in your 40s has half the time. All calculations run in your browser — your data never leaves your device.
Compound interest is calculated using the future value formula, which accounts for both the growth of an initial lump sum and the accumulation of regular contributions over time. For a lump sum alone:
A = P × (1 + r/n)^(n×t)
Where A is the future value, P is the principal, r is the annual interest rate, n is the number of compounding periods per year, and t is the time in years. For regular monthly contributions (PMT), the future value of an annuity formula is added:
FV of contributions = PMT × [(1 + r/n)^(n×t) − 1] / (r/n)
The total future value is the sum of both formulas. The calculator runs this for each year to produce the year-by-year growth table, showing exactly how much of your total balance comes from contributions versus compound growth.
Elena is 28 years old and starts investing with $5,000 already saved. She contributes $300/month to an index fund averaging 7% annual return, compounded monthly. She plans to invest for 25 years until age 53.
Future value of her $5,000 lump sum: $5,000 × (1 + 0.07/12)^300 = $5,000 × 5.75 = approximately $28,750. Future value of her $300/month contributions over 25 years: $300 × [(5.75 − 1) / (0.07/12)] = $300 × 814 = approximately $244,200. Total portfolio: roughly $272,950.
Her total contributions over 25 years were $5,000 + ($300 × 300 months) = $5,000 + $90,000 = $95,000. The remaining ~$178,000 came entirely from compound growth — money that earned returns on previous returns. If she had started 5 years later at age 33, her ending balance would be roughly $185,000 — a $88,000 difference from just 5 fewer years of compounding.
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which only earns on the original principal, compound interest grows exponentially — your interest earns interest. This "compounding effect" is why long-term investments grow so dramatically: a $10,000 investment at 7% simple interest for 30 years grows to $31,000, while the same investment at 7% compound interest grows to over $76,000. The difference of $45,000 is entirely the result of compounding — interest earning interest over time.
Compound interest can compound daily, monthly, quarterly, or annually. The more frequently it compounds, the more interest you earn, because each compounding period adds to the base on which future interest is calculated. Daily compounding earns slightly more than monthly, which earns more than annual at the same stated annual rate. For most savings accounts and investment accounts, monthly compounding is standard. Our compound interest calculator lets you select any compounding frequency so you can compare the real difference in final value.
The Rule of 72 is a quick mental math shortcut for estimating how long it takes to double your money at a given interest rate. Simply divide 72 by your annual interest rate: at 6%, your money doubles in 72 ÷ 6 = 12 years; at 9%, it doubles in 72 ÷ 9 = 8 years; at 12%, in about 6 years. The rule works best for rates between 4% and 15% and assumes compound growth. It is useful for quickly evaluating investment opportunities or the cost of debt — a credit card at 24% APR doubles what you owe in just 3 years if unpaid.
Simple interest is calculated only on the original principal: Interest = Principal × Rate × Time. Compound interest also earns interest on previously accumulated interest, which creates exponential rather than linear growth. Over short periods, the difference is small. Over long periods, it becomes enormous. $10,000 at 7% simple interest for 30 years grows to $31,000. At 7% compound interest it grows to $76,122 — a difference of $45,000. This is why starting to invest early matters so much: you gain not just more years, but exponentially more compounding cycles.
Historically, the U.S. stock market (S&P 500) has returned about 10% annually before inflation, or about 7% after inflation adjustment. High-yield savings accounts currently offer 4–5% APY. CDs offer 4–5% depending on term. Bonds average 2–4%. The "right" expected return depends on your asset allocation, risk tolerance, and time horizon. For long-term retirement projections, most financial planners use 6–7% real returns for a diversified stock/bond portfolio. This calculator defaults to 7% as a commonly used conservative long-term estimate — always remember that past returns do not guarantee future results.