Compound Interest Calculator
See how your money grows with compounding and contributions.
- Author
- CentCompass
- Last Updated
- Reading Time
- 4 min read
Future value
$105,376.96
Total contributed
$49,000.00
Total interest
$56,376.96
| Year | Balance | Contributed | Interest |
|---|---|---|---|
| 1 | $3,546.06 | $3,400.00 | $146.06 |
| 2 | $6,270.34 | $5,800.00 | $470.34 |
| 3 | $9,185.33 | $8,200.00 | $985.33 |
| 4 | $12,304.36 | $10,600.00 | $1,704.36 |
| 5 | $15,641.72 | $13,000.00 | $2,641.72 |
| 6 | $19,212.70 | $15,400.00 | $3,812.70 |
| 7 | $23,033.65 | $17,800.00 | $5,233.65 |
| 8 | $27,122.07 | $20,200.00 | $6,922.07 |
| 9 | $31,496.67 | $22,600.00 | $8,896.67 |
| 10 | $36,177.50 | $25,000.00 | $11,177.50 |
| 11 | $41,185.98 | $27,400.00 | $13,785.98 |
| 12 | $46,545.06 | $29,800.00 | $16,745.06 |
| 13 | $52,279.27 | $32,200.00 | $20,079.27 |
| 14 | $58,414.88 | $34,600.00 | $23,814.88 |
| 15 | $64,979.98 | $37,000.00 | $27,979.98 |
| 16 | $72,004.64 | $39,400.00 | $32,604.64 |
| 17 | $79,521.03 | $41,800.00 | $37,721.03 |
| 18 | $87,563.56 | $44,200.00 | $43,363.56 |
| 19 | $96,169.07 | $46,600.00 | $49,569.07 |
| 20 | $105,376.96 | $49,000.00 | $56,376.96 |
What is the Compound Interest Calculator?
A compound interest calculator shows how a balance grows when returns are reinvested rather than withdrawn, so you earn returns on your contributions and on every return already credited. Compounding is what separates saving from merely accumulating: over long periods the growth on prior growth comes to dominate the total, often exceeding everything you personally deposited.
How the calculation works
Each period the existing balance grows by the periodic rate, and then your contribution for that period is added. The following period, the larger balance grows again. Early on the effect looks almost linear and unremarkable, because the balance is small and returns are modest in absolute terms. As the balance builds, each period's growth is calculated on a bigger number, and the curve steepens — which is why time in the market matters more than the size of any single contribution.
The formula
For a lump sum, A = P(1 + r/n)^(nt): P is the starting principal, r the annual rate as a decimal, n the number of compounding periods per year, and t the number of years. Regular contributions add a second term, the future value of an annuity: PMT · [((1 + r/n)^(nt) − 1) / (r/n)], where PMT is the contribution per period. The total balance is the sum of the two. The rule of 72 gives a quick sanity check: 72 divided by the annual percentage return approximates the years needed to double your money.
Worked example
Starting with $1,000 and adding $200 a month at 7% for 20 years grows to roughly $109,000. Of that, only about $49,000 came out of your pocket — $1,000 initially plus 240 monthly deposits. The remaining $60,000 is growth, and more than half of that growth accrued in the final seven years, when the balance was largest. Applying the rule of 72 to a 7% return suggests money doubles roughly every ten years, which matches the shape of the curve.
Tips
- Time is the strongest variable — starting a decade earlier usually beats contributing more later.
- Contribute consistently rather than trying to time the market.
- More frequent compounding raises the effective yield slightly for the same nominal rate.
- Compare accounts on APY rather than the nominal rate, since APY already includes compounding.
- Reinvest interest and dividends; withdrawing them removes the mechanism entirely.
Common mistakes
- Entering a bank's advertised APY into a calculator that expects the nominal rate, which double-counts compounding.
- Reading a nominal projection as spending power and forgetting inflation.
- Assuming a steady annual return, when real market returns arrive unevenly.
- Withdrawing gains along the way and wondering why the curve never steepens.
- Ignoring account fees, which compound against you exactly as returns compound for you.
Limitations
The projection assumes a constant rate of return and perfectly regular contributions, neither of which describes real markets or real life. It reports nominal dollars, so it does not adjust for inflation, and it excludes taxes on interest or gains as well as account and fund fees. Treat the output as a model of how compounding behaves, not a forecast of a specific balance.
Frequently asked questions
What is compound interest?
It is interest earned on your principal and on the interest already credited to the account. Because each period's return is calculated on a larger balance than the last, growth accelerates the longer the money stays invested.
Compound vs simple interest?
Simple interest is calculated only on the original principal, so it grows in a straight line. Compound interest is calculated on principal plus accumulated returns, producing a curve that pulls away from simple interest dramatically over long periods.
What is the rule of 72?
Divide 72 by the annual percentage return to approximate how many years your money takes to double. At 6% that is about twelve years; at 9%, about eight. It is a mental shortcut rather than an exact formula, but it is accurate enough for typical rates.
Does compounding frequency matter?
Yes, though less than people expect. For the same nominal rate, daily compounding produces slightly more than monthly, which produces slightly more than annual. The gap is small compared with the effect of the rate itself or the number of years invested.
What is the difference between APR and APY?
APR is the nominal annual rate before compounding is considered, while APY is the effective rate after compounding within the year. Banks advertise APY on deposits, so entering an APY into a calculator that also applies compounding will overstate your growth.
Does this account for inflation?
No. Results are nominal, meaning they are not adjusted for rising prices. To think in today's purchasing power, subtract an assumed inflation rate from your return and use that lower real rate instead.
What is continuous compounding?
It is the theoretical limit of compounding infinitely often, calculated as A = Pe^(rt). It produces marginally more than daily compounding and appears mostly in academic and derivatives contexts rather than in retail savings products.
Where does money actually compound?
Savings accounts, certificates of deposit, and money market accounts credit interest that compounds. Investment accounts compound through reinvested dividends and capital growth, though returns there vary rather than being fixed.
Are the returns taxed?
In a standard taxable account, interest is generally taxable in the year it is credited, which slows compounding. Tax-advantaged accounts such as a 401(k) or IRA defer or eliminate that drag, which is a large part of their advantage over long horizons.
Is my deposit account insured?
Deposits at federally insured banks are protected by the FDIC, and credit union deposits by the NCUA, up to the applicable limits per depositor and ownership category. Investment accounts are not insured against market losses.
Related calculators
Related guides
Sources
- Investor.gov (SEC) — Compound Interest Calculator
- SEC — Ten Things to Consider Before You Make Investing Decisions
- FDIC — Deposit Insurance
How this page is produced
Editorial process. CentCompass is maintained independently, and this page is written and checked against the official publications listed above before it goes live. There is no separate editorial reviewer. This page was last checked on . See our editorial policy.
How the calculations work. Every result comes from a small, unit-tested calculation engine rather than a spreadsheet or a hardcoded table. Loans use the standard amortization formula, growth uses compound-interest math, income tax applies the federal progressive brackets, and payroll applies Social Security and Medicare rules. Our methodology sets out each one.
Where the figures come from. Tax brackets, standard deductions, FICA parameters, and contribution limits are stored once in a dated registry and read directly by the calculators — the same values appear in the text above, so the two can never drift apart. Each figure records its source, effective tax year, and review status on our data sources page.
Update policy. Regulatory figures are checked against their primary source when the IRS, SSA, or another authority publishes new values — typically each autumn for the following tax year — and again at the scheduled review date recorded for each dataset. Figures that have not been checked yet are marked as draft on the data sources page until that check is complete.
Educational purposes only — not financial, tax, or investment advice (disclaimer).