Compound Interest Calculator

How to use the compound interest calculator

Compound interest is how savings accounts, bonds, and long-horizon investments grow. Unlike simple interest, the gains each period earn their own return the next period — the return on the return on the return, which is why wealth-building material emphasizes time in the market over timing it. This tool shows both the ending balance and the year-by-year growth so you can see the curve steepen.

1. Enter the starting principal — the amount you have today, before any contributions.
2. Enter the annual rate as a percent, not a decimal. Enter 7 for a 7% return, not 0.07.
3. Pick the time horizon in years. Retirement calculators typically use 20–40; a CD might be 5.
4. Pick a compounding frequency: annually, semi-annually, quarterly, monthly, or daily. Most US savings accounts compound daily; mortgages and bonds are usually monthly or semi-annually.
5. Optionally add a monthly contribution. The result splits growth from principal vs. growth from interest so you can see the returns pulling their weight.

The formula

A = P(1 + r/n)^(nt), where A is the ending balance, P the principal, r the annual rate as a decimal, n the compounding periods per year, and t the number of years. Monthly contributions are added as an annuity term so the math matches a real deposit schedule.

A caveat

Real-world returns are not smooth. A 7% long-run average hides years of +20% and years of −30%. Inflation also erodes purchasing power — sometimes it's useful to model the real return (nominal minus inflation) rather than the headline rate. This tool is informational, not financial advice.