Calculation Summary
- Future value:
- Initial investment:
- Total regular contributions:
- Total amount invested:
- Interest earned:
Compound Interest Calculator
See how your money can grow over time with compound interest and regular contributions. Adjust rate, compounding, deposits and time horizon to model your savings or investment plan.
Enter your starting amount, contributions, rate and time to see the projected future value with compound interest.
How this Compound Interest Calculator works
This calculator combines your initial investment, regular contributions and chosen compounding frequency using standard compound interest math.
- When contribution frequency matches compounding (for example, both monthly), it applies exact compound interest and annuity formulas with contributions at the end of each period.
- When schedules differ (for example, weekly contributions with monthly compounding), it splits the timeline into smaller steps so that contributions are added on their own schedule and interest is applied whenever a compounding point occurs.
- If the total horizon is not an exact number of compounding periods, a proportional final compounding adjustment is applied for the remaining fraction.
What is compound interest?
Simple interest is calculated only on your original amount (the principal). Compound interest is calculated on your principal plus any interest you've already earned.
Compound interest formula with example:
FV = P x (1 + r / n)n x t
- P - initial amount (principal)
- r - annual interest rate as a decimal (5% = 0.05)
- n - number of compounding periods per year (12, 4, 1, etc.)
- t - time in years
- FV - future value
The key idea: your interest starts earning interest. The more often it compounds and the longer it stays invested, the stronger the effect.
Compound interest vs simple interest
Simple interest is calculated only on the original amount (principal). The interest stays the same every period.
Compound interest is calculated on the principal plus previously earned interest. The interest “earns interest,” so your money grows faster over time.
Where compound interest is used
Long-term investing
- Index funds and ETFs
- Retirement and pension plans
- Diversified stock and bond portfolios
- Automatic investment plans
Over 10-30+ years, growth becomes much closer to an exponential curve than a straight line. A large share of the final value often comes from growth, not from your original contributions.
Savings and deposit products
- High-interest savings accounts
- Term deposits / GICs / certificates of deposit
Interest added to your balance becomes part of the principal and earns more interest going forward.
Debt and high-interest borrowing
Compound interest can also work against you:
- Credit cards and store cards
- Lines of credit
- Some personal loans and overdue balances
If you don't pay in full, interest is charged on a growing balance. Same math, opposite effect — this is why understanding compounding is critical for avoiding “snowballing” debt.
Mortgages
Mortgages apply compound interest plus regular payments. Early years are interest-heavy; over time, more of each payment goes toward principal. Knowing how compounding works helps you see:
- how much total interest you'll pay,
- how extra or early payments reduce future interest.
Why compound interest matters so much
Time beats size
The biggest advantage is usually not a huge starting amount, but a long time horizon. Starting earlier with smaller, consistent contributions often beats starting late with larger deposits.
Compound interest rewards people who start early, contribute regularly, and stay invested through normal market ups and downs.
Small decisions → big differences
- An extra $50-$100 per month can grow into tens of thousands over time.
- A “slightly higher” interest rate on expensive debt can quietly cost the same amount.
Understanding compounding helps you see the real cost of high-interest debt, decide when to invest versus pay down loans, and avoid offers that look harmless but compound heavily over time.
The engine behind financial independence
Compound interest is the math behind long-term wealth building, retirement planning and “buy & hold” investing. Ignoring it makes it easier to chase short-term wins, underestimate debt risks and overestimate what one-time actions can do.
How to use compound interest to your advantage
- Invest regularly, not only “when there's something left”.
- Reinvest returns instead of cashing them out too early.
- Avoid high-interest debt, especially when interest compounds frequently.
- Look at the effective annual rate (EAR/APY), not just the nominal rate.
- Use tools like this Compound Interest Calculator to see how today's decisions affect your future balance.
Once you see the growth curve visually, compound interest stops being abstract math and becomes a practical reason to start (or adjust) your strategy now, not “someday”.
Frequently Asked Questions (FAQs)
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Over time, this compounding effect allows your investment or savings to grow faster compared to simple interest.
What is the main difference between simple and compound interest?
Simple interest is calculated only on your original principal amount. In contrast, compound interest is calculated on the principal plus any interest you have already earned. This means your interest "earns interest," leading to faster growth over time.
How does the compounding frequency affect my investment?
Compounding frequency determines how often interest is added to your balance. The more frequent the compounding (e.g., monthly vs. yearly), the faster your money grows. This is because interest is added to the principal more often, increasing the base for the next interest calculation.
Can compound interest work against me?
Yes, compound interest can work against you in the form of high-interest debt, such as credit cards or lines of credit. If you don't pay off the balance in full, interest is charged on a growing total, which can lead to a "snowball effect" of increasing debt.
Does this calculator include taxes or inflation?
No. The results are shown before taxes and inflation. Actual returns may be lower depending on your tax rate and the impact of inflation over time.
Why is time considered the most important factor in compounding?
Compound interest rewards a long-term horizon because the growth curve becomes exponential over time. Starting early with smaller, consistent contributions often results in a larger final balance than starting later with larger deposits, thanks to the power of "time in the market."
Can this calculator be used for savings and investments?
Yes. This compound interest calculator can be used for savings accounts, investments, retirement planning, or any scenario where interest compounds over time.