Compound Interest Calculator – Investment Growth
Estimate investment growth from a starting balance and monthly contributions. Enter an annual interest rate, time period, and compounding frequency to see projected future value, contributions, and interest.
Compound Interest Calculator
How the Calculation Works
Calculation: The selected annual nominal rate and compounding frequency are converted to an equivalent effective monthly rate. For each month, the calculator adds the contribution at the beginning of the month and applies that month’s growth to the resulting balance.
Assumptions: Contributions are made monthly, at the beginning of each month; the rate stays constant; and the period is rounded to a whole number of months. This is a projection, not a guaranteed return. Taxes, fees, and market volatility are not modeled.
Worked Example
Example setup: Start with $10,000, contribute $200 at the beginning of each month, and project 20 years at a 7% annual rate with monthly compounding.
- Number of monthly contributions: 20 × 12 = 240
- Total contributions: $10,000 + ($200 × 240) = $58,000
- Monthly growth rate: 7% ÷ 12, or about 0.5833%
The calculator applies the monthly contribution and growth step 240 times. The displayed future value is the projection; interest is calculated as that value minus $58,000 in total contributions. Try the inputs above to see the precise result.
How to Use This Calculator
Key Factors: Compounding frequency, interest rate, time invested, and regular contributions all significantly impact final results. Higher rates and longer timeframes create exponential growth.
Choosing an Interest Rate: When using this calculator, enter an interest rate appropriate for your investment type. Actual rates and investment returns vary and are not guaranteed. Conservative investors might model lower rates; aggressive investors might model higher rates based on their investment strategy. Use realistic estimates for your situation rather than best-case scenarios.
Frequently Asked Questions
What is compound interest?
Compound interest is interest earned on both your original principal and the accumulated interest from previous periods. Unlike simple interest (which only earns on the principal), compound interest creates exponential growth over time—"interest earning interest."
How does the selected compounding frequency affect monthly contributions?
The selected frequency determines the effective annual growth rate. The calculator converts that rate to an equivalent monthly rate, then applies each monthly contribution at the beginning of its month. More frequent compounding can slightly change the projection.
What's the difference between compound and simple interest?
Simple interest only earns on your principal amount. Compound interest earns on principal plus accumulated interest. Over time, compound interest creates exponentially higher growth, especially over decades.
How do monthly contributions affect investment growth?
Monthly contributions significantly boost your final balance. Even small regular contributions ($100-200/month) combined with compound interest can build substantial wealth over 20-30 years. The calculator shows how each contribution earns returns.
What does APY mean?
APY (Annual Percentage Yield) shows the total interest you'll earn in one year, accounting for compounding frequency. It's more accurate than APR (Annual Percentage Rate) for savings accounts because it reflects how often interest compounds.
What interest rate should I use?
Enter an interest rate appropriate for your investment type and situation. Higher-risk investments may provide higher returns but with greater volatility. Lower-risk investments offer stability but lower returns. Use realistic estimates based on your investment strategy, not best-case scenarios. Actual results and returns vary and are not guaranteed.