Compound Interest Calculator
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Result
Final balance
- Total you put in
- $130,000
- Interest earned
- $170,851
- Effective annual rate (APY)
- 7.23%
- Growth multiple
- 2.31
- From year 17 onward the interest earned exceeds everything you contributed. That crossover is the point compounding starts doing more work than you do.
Year-by-year balance
| Year | Contributed | Interest | Balance |
|---|---|---|---|
| 0 | $10,000 | $0.00 | $10,000 |
| 1 | $16,000 | $919 | $16,919 |
| 2 | $22,000 | $2,339 | $24,339 |
| 3 | $28,000 | $4,294 | $32,294 |
| 4 | $34,000 | $6,825 | $40,825 |
| 5 | $40,000 | $9,973 | $49,973 |
| 6 | $46,000 | $13,782 | $59,782 |
| 7 | $52,000 | $18,299 | $70,299 |
| 8 | $58,000 | $23,578 | $81,578 |
| 9 | $64,000 | $29,671 | $93,671 |
How is compound interest calculated?
Compound interest is calculated with A = P(1 + r/n)^(nt), where P is the starting principal, r is the annual interest rate, n is the number of times interest compounds each year, and t is the number of years. Each period's interest is added to the balance before the next period is calculated.
A = P(1 + r/n)^(nt)- A
- Final balance, including interest
- P
- Starting principal
- r
- Nominal annual interest rate, as a decimal
- n
- Compounding periods per year
- t
- Number of years
Simple interest pays only on the original principal, so $10,000 at 7% earns $700 every year forever. Compound interest adds each period's interest to the balance, so the next period earns on a larger number — the growth is exponential rather than linear. The exponent nt is the total number of compounding periods, and r/n is the rate applied in each one. Regular contributions are handled by a second term, the future value of an annuity, because each deposit compounds for a different length of time: the first contribution earns for the whole term, the last earns for one period. This calculator derives the contribution rate from the effective annual rate rather than dividing the nominal rate, which is what lets contributions and compounding run on different schedules without understating the result.
- Divide the annual interest rate by the number of compounding periods per year.
- Add 1 to that periodic rate.
- Raise the result to the power of total periods — periods per year times years.
- Multiply by the starting principal to get the balance from the principal alone.
- Add the future value of your contributions, compounded for their own remaining terms.
- Subtract everything you paid in to find the interest earned.
Worked example: $10,000 starting balance, $500 a month, 7% annual rate, monthly compounding, 20 years
$10,000 starting balance, $500 a month, 7% annual rate, monthly compounding, 20 years
The monthly rate is 7% ÷ 12 = 0.5833%, and 20 years is 240 compounding periods. The starting $10,000 alone grows to 10,000 × (1.005833)^240 = $40,387. The contributions are a separate calculation: 240 deposits of $500, each compounding for however long it has left, come to $260,463. Together the balance reaches $300,850. You contributed $130,000 of that — the original $10,000 plus $120,000 of deposits — so $170,850 is interest. More than half the final balance is money the account earned rather than money you paid in, and the crossover happens around year 13. Shortening the term to 10 years rather than 20 does not halve the result; it cuts it to roughly $93,000, because the last ten years is when the largest balance is compounding.
What each compound interest input means
- Starting balance
- The amount you are starting with today. Use the current balance of the account, not what you have paid into it.
- Regular contribution
- What you add each period. For a workplace plan, include only your own contribution here and add the employer match separately.
- Contribution frequency
- How often you add money. This is independent of how often the account compounds.
- Annual interest rate
- The nominal annual rate, before compounding is applied. A bank quoting APY is quoting the effective rate instead — enter the nominal rate and compare the APY this tool returns.
- Years to grow
- How long the money stays invested. The single most powerful input on this page.
- Compounding frequency
- How often the account adds earned interest to the balance. Savings accounts are usually daily or monthly; bonds and CDs are often semi-annual.
- Contribute at the start of each period
- Depositing on payday rather than at period end earns one extra period of interest on every contribution.
What this compound interest does not account for
- Returns are assumed constant. No real market delivers 7% every year — a sequence of good and bad years averaging 7% produces a different, usually lower, final balance than a steady 7%.
- Figures are nominal, before inflation. To see the result in today's purchasing power, subtract your expected inflation rate from the interest rate: enter 4% rather than 7% if you expect 3% inflation.
- Tax is not applied. Growth inside an IRA, 401(k) or ISA is sheltered; growth in a taxable brokerage account is not, and the drag is significant over 20 years.
- Contributions are assumed never to change. In practice most people increase them with income, which the flat figure here understates.
- Fees are not deducted. A 1% annual expense ratio on the example above costs roughly $45,000 over 20 years, so enter the rate net of fees for an accurate projection.
Frequently asked questions
What is the formula for compound interest?
The formula is A = P(1 + r/n)^(nt). P is the principal, r the annual rate as a decimal, n the compounding periods per year, and t the years. With regular contributions, add the future value of an annuity to the result.
How often should interest compound?
More often is better, but the gains flatten fast. At 7% on $10,000 over 20 years, annual compounding returns about $38,700 and daily about $40,500. The rate and the time invested both matter far more than the frequency.
What is the difference between APR and APY?
APR is the nominal annual rate before compounding. APY is what you actually earn once compounding within the year is counted. A nominal 7% compounded monthly is an APY of 7.23%. Compare savings accounts on APY.
How long does it take to double your money?
Divide 72 by the annual interest rate — the rule of 72. At 7% that is roughly 10.3 years, against an exact answer of 10.2. The approximation holds well for rates between about 5% and 12%.
Does this calculator account for inflation?
No, the figures are nominal. For a real-terms result, subtract your expected inflation rate from the interest rate before entering it. At 7% growth and 3% inflation, enter 4% to see the balance in today's money.
Is compound interest better than simple interest?
For a saver, yes, and the gap widens with time. For a borrower it is the opposite: compounding on credit card debt is why a balance left unpaid grows faster each month. The same mechanism works for or against you.
Sources and review
“Compound interest is the interest you earn on interest.”
Compound interest calculator and investor bulletin — U.S. Securities and Exchange Commission
Last reviewed .