Compound Interest Calculator
See how compound interest grows your money over time. Compare daily, monthly, quarterly, and annual compounding with regular contributions.
How compounding works
Compound interest is interest paid on interest. Each period, you earn a return on your growing balance — so the interest you earned last period also earns interest this period. This is why early years feel slow and late years feel explosive: after 10 years at 7%, $10,000 becomes ~$20,000, but after 30 years it becomes ~$76,000. Time is doing more work than the rate.
Why regular contributions matter more than a lump sum
For most people, the biggest lever isn't starting balance — it's monthly contributions. $200/month invested for 30 years at 7% grows to over $243,000, despite you only contributing $72,000. That's the compounding effect on a stream of cash. Set up an automatic transfer on payday so the decision only has to be made once.
The rule of 72 (a quick mental check)
Divide 72 by your rate of return to estimate how many years it takes for money to double. At 7%, money doubles about every 10 years. At 9%, every 8 years. At 4%, every 18 years. It's a useful gut-check when you're comparing savings accounts, investments, or projecting retirement.
Where people go wrong
Waiting. Starting late costs more than almost anything else — a 20-year-old and a 30-year-old who each contribute the same monthly amount won't end up with similar balances; the 20-year-old often ends up with 2× more at retirement. If you're late to the game, the answer is to contribute more aggressively rather than chase higher returns.
Inflation, taxes, and realistic numbers
This calculator shows nominal growth. Real purchasing power is lower by the inflation rate — usually 2–3% per year in the US. Taxes further reduce after-tax returns in non-qualified accounts. For planning, it's reasonable to use a 5–6% real return for a balanced portfolio rather than the 7–10% nominal numbers you see in headlines.
Frequently asked questions
What's the difference between simple and compound interest?▾
Simple interest pays only on your original principal — 5% on $10,000 is $500 every year, period. Compound interest pays on principal plus all previously earned interest. After year 1 you'd earn on $10,500, after year 2 on $11,025, and so on. Over 30 years the gap becomes enormous.
Does compounding frequency matter?▾
A little. Daily compounding beats annual for the same nominal rate, but the difference is smaller than people think — typically less than 0.3% per year at normal rates. What matters much more is the rate itself, your contribution amount, and time.
Are these results before or after taxes and inflation?▾
Before. The calculator shows nominal growth. To get real (inflation-adjusted) purchasing power, subtract inflation from the return rate — e.g., 7% growth minus 3% inflation = 4% real return. Taxes depend on the account type: a Roth IRA or Roth 401(k) grows tax-free, a taxable brokerage account is taxed on dividends and gains.
What's a realistic long-term rate of return?▾
The S&P 500 has averaged about 10% annually over the last century, or ~7% after inflation. A conservative mixed portfolio (60% stocks / 40% bonds) averages ~6–8% nominally. High-yield savings accounts and CDs currently yield 4–5%. Don't model 12%+ unless you're willing to accept major volatility.
Should I contribute at the start or end of the month?▾
Contributing at the start of each month lets your money compound for an extra month, so it grows slightly more — typically 0.1–0.5% more over 20+ years, depending on the rate. Small, but free. If you're setting up automatic contributions, schedule them on the 1st of the month.
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