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How to use the compound interest calculator
Enter the amount you start with, the yearly interest rate, how many years you will save or invest, and how much you add each month. Use 0 for a monthly deposit if you are only letting an existing amount grow. The result shows the future value, the total you put in and the interest earned.
How compound interest works
Compound interest is interest earned on your interest. Each month the calculator adds one twelfth of the yearly rate to the balance, so the next month’s interest is calculated on a slightly larger amount. The formula is:
future value = P × (1 + i)^N + C × ((1 + i)^N − 1) ÷ i
Here P is the starting amount, C is the monthly deposit, i is the yearly rate divided by 12 as a decimal, and N is the number of months. Deposits are added at the end of each month.
Example: $5,000 at 5% for 10 years with $100 added each month. You put in $17,000 in total. The balance grows to about $23,760, so the interest earned is about $6,760.
Why time matters more than the rate
Interest compounds on itself, so the longest-running growth comes late. Most of the gain in the example above happens in the final years. A quick way to estimate growth is the Rule of 72: divide 72 by the yearly rate to get the approximate number of years for money to double. At 6%, that is about 12 years. It is a rough guide that works best for moderate rates.
What the calculator leaves out
The calculator compounds monthly, which is common for savings accounts. It does not include account fees, taxes on interest, inflation or changes in the rate. Investment returns are not guaranteed, so treat the result as a planning estimate, not a promise.
Questions about compound interest
Does monthly compounding make much difference compared with yearly?
Some. At the same rate, monthly compounding earns slightly more than yearly compounding. The gap grows with higher rates and longer periods.
Do the numbers include inflation?
No. The results are in nominal money. Inflation reduces what the money can buy, so the real value of the future amount is lower than the figure shown.
What is the Rule of 72?
It is a shortcut for estimating how long money takes to double. Divide 72 by the annual rate. At 8%, money roughly doubles in 9 years. The rule is an approximation, so use the calculator for exact figures.