Interactive financial calculator
Compound Interest Calculator
See how a starting balance and recurring contributions could grow when assumed returns are reinvested.
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Methodology & Assumptions
How this estimate is calculated
Formula: A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) / (r/n)]. Contributions are added at the end of each month and compounding is monthly. The return input is nominal; taxes, fees, and inflation are not deducted.
Illustrative result: figures are rounded for display after calculations use full numeric precision. Actual results may differ.
Currency: dollar symbols are a display convention. Enter every monetary amount in one consistent currency; the calculator does not convert currencies or apply jurisdiction-specific tax rules.
How Compound Interest Works
Compound interest means earning returns on your returns. Unlike simple interest — where you only earn on your original principal — compound interest reinvests every gain, creating exponential growth over time. The longer the period, the more dramatic the effect.
Simple interest example: $10,000 at 7% for 30 years = $31,000
Compound interest example: $10,000 at 7% for 30 years, compounded monthly (this calculator's convention) = $81,165
Same principal, same rate, same time — compound interest produces about 2.6× more wealth.
The Formula
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) / (r/n)]
Where: A = final amount, P = principal, r = annual rate, n = compounding periods/year, t = years, PMT = monthly contribution. This calculator applies this formula in real time as you type.
Why Monthly Contributions Amplify Growth
| Scenario | Initial | Monthly | Years | Result (7%) |
|---|---|---|---|---|
| Lump sum only | $10,000 | $0 | 30 | $81,165 |
| Contributions only | $0 | $500 | 30 | $609,985 |
| Both combined | $10,000 | $500 | 30 | $691,150 |
The Early Start Advantage
An investor who starts at 22 and invests $400/month for 10 years (stopping at 32, then leaving the balance untouched) accumulates approximately $692,826 by age 65 at a constant 7% annual return, compounded monthly. An investor who starts at 32 and invests $400/month for 33 consecutive years — contributing $110,400 more in total ($158,400 vs. $48,000) — accumulates approximately $617,625, about $75,201 less. Starting earlier let a much smaller total contribution compound over a longer period. Time is the irreplaceable variable.
Also useful: FIRE Number Calculator — see when compound growth will fund your retirement.
Frequently Asked Questions
What annual return rate should I use?
The S&P 500 has historically returned approximately 10% annually (nominal) and 7% after inflation. For conservative long-term planning, use 6-7%. For optimistic projections, 8-9%. Most FIRE planners use 7% as the standard assumption.
Does compounding frequency matter?
Somewhat, but less than most people expect. $10,000 at 7% for 30 years: annual compounding = $76,123; monthly compounding (this calculator's convention) = $81,165; daily compounding = $81,645. The difference between monthly and daily is only about $480 — frequency matters far less than rate and time.
How do fees affect compound growth?
Substantially. A 1% annual fee on a $200,000 balance over 30 years (7% vs. 6% net return, no further contributions, monthly compounding) costs approximately $419,000 in lost ending value. Use low-cost index funds with expense ratios under 0.10% to keep the full benefit of compounding.
What's the Rule of 72?
A quick mental calculation: divide 72 by your annual return rate to find years to double. At 7% returns, money doubles every 10.3 years. At 6%, every 12 years. At 9%, every 8 years. Over a 40-year career, a 7% portfolio doubles approximately 3-4 times.