Compound Interest Calculator

How compound interest works when you add money every month

Compound interest is the simple idea that the return you earn this year becomes part of the balance that earns a return next year. Nothing more exotic is involved. If an account grows by a few percent and you leave that growth where it is, the next few percent are calculated on a slightly larger number, and the year after that on a larger number again. Over a handful of years the effect is hard to notice. Over two or three decades it usually becomes the largest part of the final balance, which is why the same habit of saving can end in very different places depending on how long it is left alone.

This calculator follows that process one month at a time. It starts with the initial amount you enter. At the start of every month it adds your monthly contribution, then applies one month of growth to the whole balance, including everything that has grown before. Twelve of those steps make a year, and the year-by-year table shows the balance and the running total of what you have paid in at the end of each one. Because every deposit lands at the start of its month, each one earns a full month of growth before the next arrives. The difference between the balance and what you contributed is the gain, and the page shows it as an amount and as a share of your deposits.

The headline figure is a projection, not a promise. It assumes the same annual return every single year, which no real investment delivers. Markets rise and fall, savings rates change, and the order in which good and bad years arrive matters once you start adding or withdrawing money. Treat the result as the answer to a precise question: if the return averaged exactly this much and you kept depositing exactly this amount, where would you end up. Change the inputs to see how sensitive that answer is, and pin a version you like so you can compare it with the next one side by side.

Yearly, monthly or daily compounding

The compounding setting answers a narrow question: how often is growth added to the balance, given the same stated annual rate. With monthly compounding, the calculator divides the annual rate by twelve and applies that every month, which is how most savings accounts and many illustrations quote it. With yearly compounding, growth is credited once a year, so a stated rate earns slightly less over the year. With daily compounding it is credited every day, so the same stated rate earns slightly more. Because your deposits arrive monthly, the calculator does not switch to a yearly or daily loop for those two settings. Instead it converts the stated rate into the monthly rate that produces exactly the same growth over a year, and applies that every month. The yearly totals therefore match what yearly or daily crediting would give on the money already in the account, while every deposit is still added on the same monthly schedule. In practice the gap between monthly and daily compounding is small, and the gap to yearly compounding is larger but still modest next to the effect of the rate itself or of a few extra years.

Compound interest compared with simple interest

Simple interest pays a return only on the money you put in, never on earlier returns. The calculator works out that alternative for the same deposits so you can see what compounding itself adds. Your initial amount earns the stated rate once per year for the whole period, and each monthly deposit earns the same rate for the months it has been in the account, with nothing reinvested. The card that compares the two shows the simple-interest total and the difference between it and the compounded balance. Early on the two lines sit almost on top of each other, because the returns that could earn returns are still small. The gap opens slowly and then quickly, and in the chart it is the widening space between the curve and the straight line of contributions. That gap is the reason time in the account matters so much: most of it appears in the last third of a long period.

The rule of 72 and its exact form

The rule of 72 is a mental shortcut for doubling time: divide 72 by the annual return in percent and you get roughly how many years it takes for money to double with nothing added. At 6% the rule says 12 years. The exact answer comes from logarithms, the natural log of two divided by the natural log of one plus the rate, which at 6% gives about 11.9 years. At 9% the rule says 8 years and the exact figure is very close to it. The shortcut works because it is tuned for the middle of the range people usually use, and it drifts at very low or very high rates. The callout on the result shows both numbers for the rate you enter, so you can see how close the shortcut is. Doubling time applies to a single lump sum. With monthly deposits the balance grows faster than that, because new money keeps arriving.

What this calculator assumes, and what it leaves out

Every figure on this page comes from the same few assumptions. Deposits are made at the start of each month and never skipped. The annual return is constant for the whole period. Nothing is withdrawn. The results are before tax and before fees, and they are in future dollars, not adjusted for inflation, so a large balance decades from now will buy less than the same number would today. Taxes on interest and gains depend on the account type and where you live, and fund or platform fees reduce the return you actually keep, so a real account will usually end below the figure shown here. If you want a rough sense of the effect of fees, lower the annual return by the yearly cost you pay and run the numbers again. To think in today's money instead, enter a return that is already reduced by the inflation you expect. Neither adjustment is exact, but both move the projection closer to what you are likely to see.