Compound Interest
Watch a lump sum and regular contributions grow, see exactly how much of the final figure is interest rather than your own money, and check what it is worth in today's dollars.
Instant answers
Works offline once loaded
Nothing you type is sent anywhere
Any compounding frequency
Regular contributions
Inflation-adjusted
Starting point
Historic stock-market average is about 10% before inflation, 7% after.
Paying at the start earns one extra period of interest on every deposit.
Set this to your expected raise to keep contributions in step with income.
Used only for the "in today's money" figure.
Balance after 25 years
—
Interest earned—
Total you put in—
Interest as a share of the total
In today's money—
Effective annual rate—
Interest in the final year alone—
Your money doubles at
Growth over time
Hover the chart to read any year.
Year by year
| Year | Paid in this year | Interest this year | Total paid in | Balance | In today's money |
|---|
Instructions
How to use this calculator
Step by step
- Enter what you are starting with. Zero is fine if you are beginning from nothing and relying on contributions.
- Set the annual rate. For a savings account use the APY your bank quotes; for an investment projection use a long-run average — 7% after inflation is the usual conservative figure for a stock index.
- Choose how long you are projecting. The interesting behaviour of compounding only appears past about fifteen years, so try extending the horizon and watching the interest share climb.
- Add a regular contribution and how often you make it. If your contributions rise with your salary, put your expected raise in the "increases each year" box.
- Pick the compounding frequency. Banks usually compound daily or monthly; the difference between them is small, and the difference between annual and continuous is the largest gap you will see.
- Read the coloured bar: purple is what you started with, blue is what you added, gold is what the interest produced. On a long horizon the gold section takes over, which is the whole point.
- Use the second chart tab to see the same balance in today's money. A 40-year projection without that adjustment overstates what you will actually be able to buy.
Good to know
- Time matters more than rate. Twenty-five years at 6% beats fifteen years at 10% for the same monthly contribution — check it here, it takes ten seconds.
- Contributing at the start of each period rather than the end earns one extra period of interest on every deposit. Over decades it is worth a surprising amount for zero extra money.
- The rule of 72 is a good mental shortcut: divide 72 by the interest rate to get the doubling time. At 8% money doubles roughly every nine years.
- A 1% difference in fees is a 1% cut in your rate. Enter your return net of fees, not gross, or the projection flatters itself.
- Compare the "interest as a share of the total" number across different horizons. Watching it cross 50% is the clearest picture of compounding there is.
- For taxable accounts, use your after-tax return. Interest and dividends taxed each year compound on a smaller base than the headline rate suggests.
The maths behind it
- Compound growth A = P(1 + r/m)^(mt) P principal, r annual rate, m compounds per year, t years.
- Continuous compounding A = P·e^(rt) The limit as m goes to infinity — the most any rate can produce.
- Effective annual rate EAR = (1 + r/m)^m − 1 What the nominal rate is actually worth once compounding is counted.
- Future value of a series FV = PMT · ((1 + i)ⁿ − 1) / i Contributions at the end of each period; multiply by (1 + i) for start-of-period.
- Real (inflation-adjusted) value real = nominal / (1 + f)^t f is the inflation rate.
- Rule of 72 doubling years ≈ 72 / rate% Accurate to within a few percent for rates between 5% and 12%.
What is the difference between simple and compound interest?
Simple interest is paid only on the original principal, so it grows in a straight line. Compound interest is paid on the principal plus all the interest already earned, so it grows on a curve that steepens. Over one year the difference is negligible; over thirty it is the difference between doubling your money and multiplying it several times over.
Does more frequent compounding really matter?
Less than people expect. At 7%, annual compounding gives an effective rate of 7.000%, monthly 7.229%, daily 7.250% and continuous 7.251%. The jump from annual to monthly is worth having; everything past monthly is rounding. Rate and time are far more important.
What return should I assume?
For a savings account or CD, use the quoted APY. For a broad stock index, the long-run US average is about 10% nominal and 7% after inflation — but that average hides decades that were much worse. Run your projection at 5%, 7% and 9% and treat the spread as the honest answer rather than picking one.
Why is the "today's money" figure so much lower?
Because inflation compounds too, in the opposite direction. At 2.5% a year, a dollar in 30 years buys what 48 cents buys now. Any long projection stated in nominal dollars overstates your real purchasing power, which is why this calculator shows both.
What does APY mean and how is it different from APR?
APY (annual percentage yield) includes the effect of compounding; APR (annual percentage rate) does not. A 6% APR compounded monthly is a 6.168% APY. Banks quote APY on savings because it looks larger, and APR on loans because it looks smaller — both are the same arithmetic pointed in different directions.
Does this account for tax?
No. In a tax-sheltered account like a 401(k), IRA or ISA the figures apply as shown. In a taxable account, interest and dividends are taxed as they are earned, which reduces the amount that compounds. The simplest fix is to enter your after-tax rate of return.
Why do the contributions barely matter at the end?
They do not stop mattering, but the interest on an already-large balance eventually dwarfs them. Once a balance earns more in a year than you can contribute in a year, the account is doing more work than you are — the "interest in the final year alone" figure on this page shows when you have crossed that line.