Compound Interest Calculator
See how compound interest grows your money over time. Calculate savings growth with regular contributions.
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About the Compound Interest Calculator
Compound interest is interest on your interest. It is the single most important concept in personal finance and the reason starting to invest at 25 is so much more valuable than starting at 35. This page covers the formula, an example showing the 'second-half doubling' effect, and the practical rules that flow from compounding.
The Formula
Future value = P × (1 + r/n)^(n×t), where P is principal, r is annual rate (decimal), n is compounding periods per year, t is years. With monthly contributions C: FV = P × (1 + r/n)^(n×t) + C × [((1 + r/n)^(n×t) − 1) ÷ (r/n)].
Worked Example
$10,000 invested at 7% annually for 30 years with no further contributions: $10,000 × (1.07)^30 ≈ $76,123. With an additional $500/month: $76,123 + about $610,000 from monthly contributions = $686,000. The first 15 years roughly triple the money; the second 15 years roughly triple it again.
The Rule of 72
Divide 72 by your annual return to estimate doubling time. At 7%, money doubles every ~10.3 years. At 10%, every ~7.2 years. At 4%, every 18 years. This is the single most useful mental math in investing.
Why time matters more than rate
A 22-year-old who invests $5,000/year until age 30 then stops will end up with more money at 65 than a 30-year-old who invests $5,000/year for the next 35 years. Both invest similar totals but the early starter gets ~40 years of compounding on each early dollar.
Compounding frequency
More frequent compounding helps, but the effect is small. 7% compounded annually vs daily over 30 years: $76,123 vs $81,610 — only about 7% difference. Don't sweat compounding frequency; sweat the rate and the time horizon.
Common Mistakes
- Waiting to start investing until you can afford 'a lot'. Starting with $50/month at 25 beats waiting for $500/month at 35.
- Comparing returns on different time scales. Use CAGR (compound annual growth rate), not simple averages.
- Forgetting inflation. 7% nominal at 3% inflation is 4% real — half the doubling speed.
Frequently Asked Questions
What's a realistic long-term return?
US stocks have averaged 10% nominal / 7% real over a century. Conservative portfolios (60/40) average ~6-7% nominal. Use 6-7% for planning; double-digit assumptions are aggressive.
Does compounding work the same in retirement accounts?
Yes — and tax-advantaged accounts (401(k), IRA) make compounding even more powerful because you don't lose returns to annual taxation.
This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.