How compound interest works
With simple interest, you earn interest only on your original principal. With compound interest, you earn interest on both the principal and the interest already earned. Over time this creates exponential growth — each period's interest becomes next period's principal.
A = P × (1 + r ÷ n)n × t A = final amount P = principal r = annual rate (decimal) n = compounds per year t = years Example: $10,000 at 7% compounded monthly for 10 years A = 10,000 × (1 + 0.07 ÷ 12)120 = $20,097 How to use this calculator
Enter your starting amount, annual interest rate, compounding frequency, and time period. The results update instantly as you type. To include regular deposits, fill in the contribution field and choose Monthly or Annually.
Starting from scratch? Set the Initial investment to 0 if you have no lump sum and are building savings purely through regular contributions. The calculator works correctly with a $0 starting balance — this is a common scenario for new savings plans, pension contributions, and recurring investment accounts.
Contribution timing
This calculator uses end-of-period contributions (also called an ordinary annuity). This means:
- Interest is applied to your balance first at the start of each month
- Your contribution is then added at the end of that month
- Annual contributions are added at the end of each 12-month period
This is the standard convention used by most financial calculators, savings account projections, and investment planners. If your real-world account adds contributions at the beginning of each month (annuity-due), the actual balance will be slightly higher than shown — by roughly one month's interest on each contribution.
Compounding frequency
The more frequently interest compounds, the faster your balance grows — even at the same annual rate. The difference between monthly and annual compounding on a $10,000 deposit at 7% over 10 years is approximately $90. Daily versus monthly makes almost no practical difference.
| Frequency | Times/year | $10K at 7% — 10 years |
|---|---|---|
| Annually | 1 | $19,672 |
| Quarterly | 4 | $19,989 |
| Monthly | 12 | $20,097 |
| Daily | 365 | $20,137 |
Frequently asked questions
Can I calculate growth without an initial investment?
Yes. Set the Initial investment to 0 if you're starting from scratch and making regular contributions. The calculator will estimate how your monthly or annual deposits grow over time based on the selected interest rate and compounding frequency.
For example, contributing $200 per month at 7% compounded monthly for 20 years — with no starting balance — produces a final balance of approximately $104,000, of which $48,000 is deposits and $56,000 is interest.
What does "end-of-period" mean for contributions?
It means your deposit is added after interest is applied for that period. So in month one, your balance earns interest first, then your contribution is added. This slightly reduces the total compared to beginning-of-period (where the deposit arrives before that month's interest is calculated). The difference compounds over time but remains small for typical deposit sizes relative to the balance.
What is the difference between annual rate and APY?
The annual rate (also called nominal rate) is the stated percentage before compounding is applied. APY (Annual Percentage Yield) is the effective annual rate after compounding — it is always equal to or higher than the nominal rate. At 7% compounded monthly, the APY is approximately 7.23%. When comparing savings accounts, compare APYs rather than nominal rates.
What does "total return" mean in the results?
The total return percentage shown under "Interest earned" is your cumulative return over the full period — total interest divided by total amount contributed. It is not an annualised figure. A 100% total return over 10 years corresponds to roughly 7.2% per year — very different numbers that both describe the same result.
How accurate are the projections?
The calculator assumes a constant interest rate for the entire period. Real-world returns fluctuate — a savings account rate changes with central bank decisions, and investment returns vary year to year. Use the results as a planning estimate, not a guarantee. For variable-return scenarios, try different rate assumptions to see best-case, expected, and conservative projections.
Does this calculator store my data?
No. All calculations run in your browser. Nothing is sent to a server or saved anywhere.