Compound Interest Calculator

Why compounding matters

Compound interest means you earn returns on both your original money and on prior returns. Over long horizons, the “return on returns” can become a major share of the final balance, especially when contributions are consistent.

This calculator uses a practical monthly simulation: each month it adds your contribution and then applies the monthly growth rate derived from the annual rate. That approach is easy to reason about and aligns with how many real-world contributions and balances behave.

Because markets fluctuate, the annual return is an assumption, not a guarantee. Use it to compare scenarios (saving more, saving longer, or using a different return assumption) rather than to predict an exact outcome.

Inputs that drive the outcome

Starting amount determines your baseline. Monthly contributions often matter even more over time because they create a steady stream of deposits that each get their own compounding runway. If you’re just getting started, a consistent contribution can outweigh a larger starting balance over long horizons.

The annual return rate is the most uncertain input. A difference of 1–2 percentage points can materially change outcomes over decades. For planning, it’s reasonable to test multiple rates (for example 5%, 7%, and 9%) and use the range as your expectation band.

Contributions vs. growth: what to watch

A helpful way to interpret results is to separate the final balance into two buckets: what you contributed and what growth added. Early on, contributions usually dominate; later, growth often dominates. This transition point depends on your contribution rate, return assumption, and time horizon.

If your goal is to reach a target balance, you can trade time for contribution size. Longer horizons make compounding do more work; shorter horizons require larger contributions. The fastest way to find a plan that fits your budget is to adjust years and monthly contribution until the projected value is in the right range.

Practical tips for real planning

This tool uses a constant return rate for clarity. Real returns are volatile and sequence matters: strong returns early can boost compounding, while weak early returns can slow progress. To be cautious, test a lower return and keep a buffer in your plan.

Also consider taxes and account type. A retirement account, brokerage account, or savings account can have different after-tax outcomes. This calculator is best used as a high-level projection, not a tax estimate.

Limitations and what to adjust next

This projection uses a steady average return and steady contributions. In reality, returns vary month to month, contribution patterns can change, and taxes may reduce net growth depending on account type. Those details affect precision, but the model remains useful for understanding direction and scale.

If you’re planning a goal (like a down payment or a target retirement balance), try these adjustments: lower the return rate, add a contribution “increase” by manually stepping the monthly contribution up, or reduce the time horizon. If the plan still works under conservative assumptions, it’s more robust.

Finally, remember that compounding rewards patience and consistency. The biggest improvements usually come from saving more regularly and staying invested longer, not from tiny changes to the assumed return.