See how your money grows with compound interest
Compound interest means you earn interest not just on your original investment, but also on all the interest you have already accumulated. Over time, this creates exponential growth — the longer you invest, the faster your money grows.
The difference between simple and compound interest becomes dramatic over long time horizons. $10,000 invested at 7% simple interest for 30 years gives $31,000. The same amount at 7% compound interest gives $76,123 — more than twice as much.
FV = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) / (r/n)]
Where P is the starting amount, PMT is the monthly contribution, r is the annual interest rate, n is the compounding frequency (12 for monthly), and t is the time in years. The calculator above applies this formula and shows year-by-year growth.
Regular contributions dramatically accelerate compound growth. Consider two scenarios over 30 years at 7% annual return:
| Strategy | Starting amount | Monthly contribution | Final balance |
|---|---|---|---|
| Lump sum only | $10,000 | $0 | ~$76,000 |
| Monthly only | $0 | $200 | ~$243,000 |
| Both | $10,000 | $200 | ~$319,000 |
The monthly contribution scenario produces three times more than investing a lump sum alone — demonstrating why consistent investing matters more than trying to time the market with a large one-time investment.
Small differences in interest rate have massive long-term effects. $500/month invested for 30 years:
| Annual return | Final balance | Total invested | Interest earned |
|---|---|---|---|
| 4% | ~$347,000 | $180,000 | ~$167,000 |
| 6% | ~$502,000 | $180,000 | ~$322,000 |
| 8% | ~$745,000 | $180,000 | ~$565,000 |
| 10% | ~$1,131,000 | $180,000 | ~$951,000 |
Time in the market is the single most powerful factor in compound growth. Two investors each contribute $300/month at 7% annual return:
Investor A starts at 25 and invests for 40 years — final balance approximately $798,000. Investor B starts at 35 and invests for 30 years — final balance approximately $365,000. Investor A contributed only $36,000 more ($120/month × 300 months), but ends up with $433,000 more — purely from starting a decade earlier.
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus all previously earned interest. Over long periods, compound interest produces dramatically larger returns — the gap widens every year as the interest base grows.
This calculator uses monthly compounding — interest is added to your balance 12 times per year. Most savings accounts and investment accounts compound monthly or daily. Daily compounding produces slightly higher returns than monthly for the same annual rate.
The long-term average annual return of the US stock market (S&P 500) has been approximately 10% nominal and 7% inflation-adjusted over the past century. Savings accounts and bonds typically return 2–5% depending on the interest rate environment. Use 5–7% for conservative projections and 8–10% for stock market assumptions.
No. This calculator shows nominal (before inflation) returns. To get real (inflation-adjusted) returns, subtract the expected inflation rate from your interest rate input. If you expect 7% returns and 3% inflation, use 4% as your rate to see purchasing-power-adjusted growth.
Mathematically, investing a lump sum immediately produces more growth than spreading the same money over monthly contributions — but only if you have the lump sum available. For most people, regular monthly contributions are more practical and eliminate the risk of investing everything at a market peak. Both strategies benefit enormously from starting as early as possible.