What is a compound interest calculator?
A compound interest calculator shows how a sum of money grows when it earns interest, and that interest then earns interest of its own. It's the single most important concept in long-term saving and investing: the earlier you start and the longer you leave money invested, the more the curve bends upward. This tool adds optional regular deposits so you can model a real savings or investing plan, not just a one-time lump sum.
How to use this calculator
- Enter your starting amount — the money you have invested today (use 0 if you're starting from scratch).
- Add a regular contribution and choose monthly or yearly. This is the deposit you plan to make every period.
- Set the interest rate, number of years, and compounding frequency, then press Calculate to see your future balance, total contributions, and total interest earned.
Example
Suppose you start with $10,000, add $500 every month, and earn a 7% annual return compounded monthly for 20 years. You'll have contributed $130,000 of your own money ($10,000 + $500 × 240 months), but your balance grows to roughly $300,000. The extra ~$170,000 is pure compound interest — money your money made for you.
Frequently asked questions
What is compound interest?
Compound interest is interest earned on both your original money and on the interest it has already earned. Over time this creates exponential growth, because each period you earn interest on a slightly larger balance.
How is compound interest calculated?
The core formula is A = P(1 + r/n)nt, where P is the starting principal, r is the annual rate as a decimal, n is how many times interest compounds per year, and t is the number of years. When you add regular contributions, each deposit also compounds for the remaining time.
Does more frequent compounding earn more money?
Yes, but the difference is small. Daily compounding earns slightly more than monthly, which earns slightly more than yearly, for the same nominal rate. The gap is usually a fraction of a percent.
What is the difference between APR and APY?
APR is the nominal annual rate before compounding. APY (annual percentage yield) is the effective rate after compounding is applied. APY is always equal to or higher than APR for the same account.
Are contributions added before or after interest?
This calculator adds each contribution at the end of the period (an ordinary annuity), the standard convention. Contributing at the start of each period would earn slightly more interest.