What is compound interest?
Compound interest is interest that earns interest. When you save or invest, you earn a return on the money you put in. With compounding, that return is added to your balance, and the next round of interest is calculated on the new, larger total. Over a few months the effect is tiny. Over 10, 20 or 30 years, the interest can end up being a bigger part of your balance than the money you actually deposited.
That is why time is often called the most powerful ingredient in saving. Starting early — even with small amounts — gives compounding more rounds to work its magic.
How to use this calculator
- Choose your currency.
- Enter your initial investment — the amount you are starting with today.
- Add a monthly contribution if you plan to keep saving. Leave it at 0 if not.
- Enter the expected annual interest rate and the number of years.
- Pick how often interest compounds, then press Calculate.
You will see your final balance, how much came from your own deposits and how much came from interest, plus a chart and a year-by-year table you can scroll through.
The compound interest formula
For a single lump sum, compound interest is calculated with this formula:
A = P × (1 + r/n)n × t
- A is the final amount.
- P is the principal — your starting amount.
- r is the annual interest rate as a decimal (5% = 0.05).
- n is how many times interest compounds per year (12 for monthly).
- t is the number of years.
Worked example: you invest $10,000 at 5% a year, compounded monthly, for 10 years. So r = 0.05, n = 12 and t = 10.
A = 10,000 × (1 + 0.05/12)120 = 10,000 × 1.6470 ≈ $16,470.09
You earned $6,470.09 in interest without adding another dollar.
Regular contributions make the maths longer, because every deposit compounds for a different length of time. This calculator handles that for you: each monthly deposit is added at the end of the month and grows at the rate that matches your chosen compounding frequency.
Simple interest vs compound interest
Simple interest is paid only on your original amount. With the same $10,000 at 5%, simple interest pays a flat $500 every year. Compound interest pays a little more each year, because last year's interest is now earning too. The gap starts small but widens fast:
| After | Simple interest | Compound (monthly) |
|---|---|---|
| 10 years | $15,000 | $16,470 |
| 20 years | $20,000 | $27,126 |
| 30 years | $25,000 | $44,677 |
After 30 years, compounding has produced almost $20,000 more from exactly the same deposit and rate.
Tips to grow your savings with compound interest
- Start as early as you can. Ten extra years of compounding can matter more than a higher contribution later on.
- Contribute regularly. Set up an automatic monthly transfer so saving happens without thinking about it.
- Reinvest your returns. Withdrawing interest or dividends stops them from compounding.
- Keep fees low. A 1% yearly fee sounds small, but it compounds against you and can take a large bite out of your balance over decades.
- Use tax-advantaged accounts. Accounts such as a TFSA, RRSP, ISA or 401(k) let more of your growth stay invested.
- Remember the Rule of 72. Divide 72 by your interest rate to estimate how many years it takes to double your money. At 6%, that is about 12 years.
Frequently asked questions
How often should interest compound?
The more often interest compounds, the more you earn, but the difference is smaller than most people expect. On $10,000 at 5% for 10 years, monthly compounding gives about $16,470 and daily compounding about $16,487. The interest rate, how much you contribute and how long you stay invested matter far more than the compounding frequency.
When are monthly contributions added in this calculator?
Each monthly contribution is added at the end of the month. Contributions then grow at the monthly rate that matches your chosen compounding frequency, so the results stay consistent whether interest compounds daily, monthly, quarterly, semi-annually or annually.
Does this calculator include taxes, fees or inflation?
No. The results show growth before taxes, account fees and inflation. To get a rough after-inflation figure, subtract the expected inflation rate from your interest rate. For example, use 4% instead of 7% if you expect around 3% inflation.
What interest rate should I use?
Use the rate your account actually pays. For a savings account, CD or fixed deposit, that is the advertised annual rate. For stock market investments returns vary from year to year, so many people test a cautious figure such as 5% to 7% and compare it with a more optimistic one.
Can compound interest work against me?
Yes. Credit cards and many loans compound interest too, so an unpaid balance grows the same way savings do, often at a much higher rate. Paying off high-interest debt is often one of the best guaranteed returns available.
Results are estimates for educational purposes only and are not financial advice. Actual returns vary.