Compound Interest Calculator

How it works

Compound interest is interest calculated on the initial principal plus all the previously accumulated interest. It is the engine behind long-term wealth building and the reason starting to invest early is so much more powerful than starting later. Albert Einstein reportedly called it the eighth wonder of the world.

The standard compound-interest formula for a single deposit is A = P(1 + r/n)^(nt), where P is principal, r is the annual rate, n is compounding periods per year, and t is years. When you also add regular contributions (a $500 monthly deposit, for example), the formula extends to include the future value of an annuity. This calculator handles both cases simultaneously and uses the more common 12-period (monthly) compounding by default.

Two factors dominate long-term growth: time and rate. Doubling the time horizon often more than doubles the final balance because each year's growth compounds on top of every previous year. A modest 7% real return on $10,000 grows to about $76,000 over 30 years even without further contributions; the same money grows to only $39,000 over 20 years. That extra decade nearly doubles the outcome.

Contributions matter even more for most savers. The chart shows how your principal, contributions, and earned interest stack over time — interest typically becomes the largest component late in the life of the investment as compound growth takes over. This is why "pay yourself first" — automating monthly contributions — is one of the most effective wealth-building habits.

A practical caveat: real-world returns are not smooth. Markets go up and down, and the order of returns (sequence-of-returns risk) matters once you start withdrawing. This calculator assumes a constant rate, which is fine for projection purposes but should not be confused with guaranteed performance.