Compound Interest
Watch your money grow over time
Deposits
Interest calculation for 10 years
| Year | Year Interest | Accrued Interest | Balance |
|---|---|---|---|
| 0 | — | — | $5,000.00 |
| 1 | $426.06 | $426.06 | $7,826.06 |
| 2 | $623.88 | $1,049.94 | $10,849.94 |
| 3 | $835.56 | $1,885.50 | $14,085.50 |
| 4 | $1,062.04 | $2,947.54 | $17,547.54 |
| 5 | $1,304.39 | $4,251.93 | $21,251.93 |
| 6 | $1,563.69 | $5,815.62 | $25,215.62 |
| 7 | $1,841.15 | $7,656.78 | $29,456.78 |
| 8 | $2,138.03 | $9,794.81 | $33,994.81 |
| 9 | $2,455.70 | $12,250.51 | $38,850.51 |
| 10 | $2,795.59 | $15,046.10 | $44,046.10 |
Note: This calculator is for illustrative purposes only and does not constitute financial advice. Actual returns may vary based on market conditions and investment choices.
How to Use the Compound Interest Calculator
See how your money can grow over time with compound interest. Enter a starting amount, monthly contributions, interest rate, and time period to visualize your investment growth.
The Power of Compounding
Compound interest means you earn interest on your interest. The formula is: A = P(1+r/n)^(nt) + PMT × [((1+r/n)^(nt) - 1) / (r/n)]. This accounts for both initial principal and regular contributions. For strategies to maximize your growth, read our Guide to Maximizing Compound Interest.
Key Insights
- Time is your greatest ally—start early
- Regular contributions can outpace initial principal
- Even small rate differences compound significantly over decades
- Tax-advantaged accounts (401k, IRA) maximize compound growth
Real-World Applications
Use this calculator for retirement planning, college savings (529 plans), or any long-term investment. For retirement projections, try our retirement calculator. Track your investment returns with the ROI calculator. To understand how inflation affects your savings, factor in purchasing power over time.
Frequently Asked Questions
Compound interest means you earn interest on your initial investment plus previously earned interest. $10,000 at 7% annually grows to $10,700 after year one. In year two, you earn 7% on $10,700 ($749), not just the original $10,000.
Use the Rule of 72: divide 72 by your annual return percentage. At 8% return, money doubles in 72/8 = 9 years. At 6%, it takes 12 years. This rule provides quick estimates for long-term investment planning.
Simple interest is calculated only on principal. Compound interest is calculated on principal plus accumulated interest. $10,000 at 5% simple interest earns $500/year forever. With compound interest, it earns increasingly more each year.
More frequent compounding means faster growth. Daily compounding earns more than monthly, which earns more than annually. However, the difference is often small. $10,000 at 7% for 10 years: annual compounding = $19,672; daily = $20,138.
The S&P 500 has historically returned about 10% annually (7% after inflation). Conservative estimates use 6-7%. Bonds return 3-5%. Savings accounts offer 0.5-5%. Use conservative estimates for retirement planning to avoid shortfalls.
Statistically, lump sum investing beats dollar-cost averaging about 66% of the time because markets tend to rise. However, monthly investing is more practical and reduces timing risk. Consistency matters more than timing for long-term success.