What is compound interest?

Compound interest is interest earned on both your initial principal and previously earned interest. Unlike simple interest, compound interest grows exponentially over time.

How often is interest compounded?

This calculator assumes monthly compounding, which is the most common for savings accounts and investments. Some accounts compound daily, quarterly, or annually.

What is the Rule of 72?

The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual interest rate. At 7%, it takes approximately 72/7 = 10.3 years to double.

How much does starting early matter for compound interest?

Starting early has a dramatic effect. Investing $200/month from age 25 to 65 at 7% yields roughly $525,000. Waiting until age 35 and investing the same amount yields only about $243,000 — less than half — due to missing a decade of compounding.

Free Compound Interest Calculator

Calculate how your money grows with compound interest. See the power of compounding over time with different rates and contribution amounts.

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Initial Investment

USD

Monthly Contribution

USD

Annual Interest Rate

Time Period

years

Future Value

$144,572.72

Total Contributions$58,000.00

Total Interest Earned$86,572.72

Total Contributions

Interest Earned

Future Value vs Monthly Contribution

View formula & how it works →

How Compound Interest Actually Works

Compound interest means you earn interest on your interest. After month one, your earnings get added to your balance, and next month you earn interest on that larger number. Over short periods the effect is small. Over decades it gets dramatic.

The Formula

FV = P(1+r)^n + PMT * [(1+r)^n - 1] / r

FV = What your money grows to

P = Starting amount

PMT = What you add each month

r = Monthly interest rate (annual rate / 12 / 100)

n = Total months

When to Use This

Use it to compare saving vs. spending decisions. If you're wondering whether to invest $200/month or spend it, plug the numbers in and see what 20 years of compounding does. It's also useful for comparing two scenarios side by side, like 6% vs 8% returns, or starting now vs. starting in 5 years.

What This Assumes

This calculator uses a fixed rate of return, which doesn't happen in real markets. The S&P 500 has averaged about 10% per year historically (7% after inflation), but individual years swing from -37% to +52%. Use this for planning estimates, not predictions. It also assumes monthly compounding, which is standard for most savings accounts and investment platforms.

The Part People Underestimate

The contribution matters more than the starting amount when you have time. $200/month for 30 years at 7% grows to about $243,000 in contributions and $243,000 in interest. Half of your ending balance came from money you never deposited. But almost all of that interest growth happens in the last 10 years. The first decade feels slow, and that's where most people give up.

Common Mistakes

Using a pre-inflation return rate and treating the result as today's purchasing power. If you use 10%, subtract 3% for inflation to get a realistic number.

Ignoring taxes on investment gains. In a taxable account, your actual growth is lower than the nominal rate.

Comparing compound interest across different compounding frequencies without adjusting. Monthly compounding at 6% is slightly more than annual compounding at 6%.

Example Calculation

You invest $10,000 and add $200 per month at 7% annual return for 20 years.

01Monthly rate: 7% / 12 = 0.5833% (0.005833)
02Total months: 20 * 12 = 240
03Growth of initial investment: $10,000 * (1.005833)^240 = $40,387.39
04Growth of contributions: $200 * [(1.005833)^240 - 1] / 0.005833 = $104,185.06
05Future Value = $40,387.39 + $104,185.06 = $144,572.45
06Total contributions: $10,000 + ($200 * 240) = $58,000
07Total interest earned: $144,572.45 - $58,000 = $86,572.45

Example Calculations

How much will $10,000 grow in 10 years at 5%?

$16,470.09

1.Principal: $10,000
2.Rate: 5% compounded monthly (0.4167% per month)
3.Time: 10 years (120 months)
4.A = 10,000 × (1 + 0.05/12)¹²⁰ = $16,470.09

How much will $5,000 grow in 20 years at 7%?

$20,096.61

1.Principal: $5,000
2.Rate: 7% compounded monthly
3.Time: 20 years (240 months)
4.A = 5,000 × (1 + 0.07/12)²⁴⁰ = $20,096.61

How much will $1,000 grow in 30 years at 10%?

$19,837.40

1.Principal: $1,000
2.Rate: 10% compounded monthly
3.Time: 30 years (360 months)
4.A = 1,000 × (1 + 0.10/12)³⁶⁰ = $19,837.40

How much will $50,000 grow in 5 years at 4%?

$61,009.87

1.Principal: $50,000
2.Rate: 4% compounded monthly
3.Time: 5 years (60 months)
4.A = 50,000 × (1 + 0.04/12)⁶⁰ = $61,009.87

How long does it take to double your money at 6%?

About 11.9 years

1.Use the Rule of 72: 72 ÷ 6 = 12 years (approximation)
2.Exact calculation: ln(2) / ln(1 + 0.06/12) / 12 = 11.58 years
3.With monthly compounding, $10,000 becomes $20,000 in about 11.9 years

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