Compound Interest Calculator: Free Investment Growth Tool
Compound Interest Calculator: See How Your Investments Really Grow
Table of Contents
Try the Growth Calculator
| Year | Contributions to Date | Interest Earned | Balance |
|---|
How Compound Interest Works
Compound interest is interest calculated on both your original money and the interest that money has already earned. Simple interest only pays you on your starting balance. Compound interest pays you on a growing balance, which is why the curve gets steeper the longer you leave money invested.
The two levers that matter most are time in the market and contribution consistency. A higher rate helps, but starting early and adding money on a regular schedule usually does more heavy lifting than chasing a slightly better return.
The Compound Interest Formula
The standard formula for compound interest with regular contributions is:
| Variable | Meaning |
|---|---|
| A | Future value of the investment |
| P | Starting principal |
| r | Annual interest rate (decimal) |
| n | Number of times interest compounds per year |
| t | Number of years |
| PMT | Regular contribution amount |
A = P(1 + r/n)nt + PMT × [((1 + r/n)nt − 1) / (r/n)]
Example: $10,000 Over 20 Years
Starting with $10,000, adding $200 a month, at a 7% annual return compounded monthly, grows to roughly $146,000 after 20 years. Of that, only about $58,000 came from your own pocket — the rest is growth. Use the calculator above with your own numbers to see your version of this.
How to Use This Calculator (Checklist)
- Enter your current savings or investment balance as the starting amount
- Add a realistic monthly contribution you can sustain
- Use a conservative long-term rate (historical stock market average is close to 7% after inflation)
- Pick a compounding frequency that matches your account type
- Add an inflation rate if you want to see purchasing-power-adjusted results
- Review the year-by-year table to see when interest starts outpacing your contributions
Glossary
- APR (Annual Percentage Rate)
- The yearly interest rate before accounting for compounding.
- APY (Annual Percentage Yield)
- The effective yearly return including the effect of compounding.
- CAGR (Compound Annual Growth Rate)
- The average annual growth rate of an investment over a period, smoothed for volatility.
- ROI (Return on Investment)
- Total gain from an investment, expressed as a percentage of what was put in.
- SIP (Systematic Investment Plan)
- A strategy of investing a fixed amount on a regular schedule, such as monthly.
Frequently Asked Questions
How accurate is a compound interest calculator?
It's accurate for the math it's given, but real returns vary year to year. Treat the output as a planning estimate, not a guarantee, since actual markets don't grow at a smooth fixed rate.
What's a realistic interest rate to use?
For a diversified stock portfolio, many planners use 6–8% as a long-term average. For high-yield savings or bonds, use whatever rate your account currently pays.
Does compounding frequency really matter?
It has a smaller effect than rate or time. Moving from annual to monthly compounding raises returns slightly, but adding more money or investing longer matters far more.
Should I include inflation in my projection?
Yes, if you want to know what your future balance can actually buy. A large nominal number can still lose purchasing power if inflation outpaces your return.
Is it better to invest a lump sum or contribute monthly?
A lump sum invested early generally compounds longer, but monthly contributions build the habit and work well when you don't have a large sum upfront. Many people do both.
