What is compound interest?
Compound interest means you earn interest on your interest. Each period, the interest is added to the balance, and the next period's interest is calculated on that larger amount. Over long periods this creates exponential growth — which is why starting early matters so much.
FV = P × (1 + r)ⁿ + PMT × ((1 + r)ⁿ − 1) ÷ r
P is the initial amount, PMT the monthly contribution, r the monthly rate and n the number of months.
Example
Starting with $10,000 and adding $300 a month at 7% per year for 20 years gives about $197,000. You would have contributed $82,000; the remaining $115,000 is interest.
The rule of 72
Divide 72 by the yearly return to estimate how many years it takes to double your money. At 8% per year, money doubles in about 9 years.
Frequently asked questions
How often is interest compounded?
It depends on the investment. Savings accounts often compound daily or monthly; many investments are best modeled with yearly compounding. More frequent compounding gives slightly higher results.
Is the result guaranteed?
No. Investment returns vary from year to year. Use the calculator to compare scenarios, not as a promise of future results.
Does the calculator include inflation or taxes?
No. To estimate in today's money, subtract the expected inflation from the return rate (for example 7% − 3% = 4%).
Results are estimates for information only and are not financial, legal or medical advice. Rates, taxes and fees vary — confirm with a professional or your lender.