Compound Interest Calculator

Compound interest is interest on interest. Each period, the interest earned joins the balance, and the next period pays interest on that larger amount. That is why a compounding interest calculator shows growth that speeds up over time instead of rising in a straight line.

To calculate compound interest on one deposit, called the principal, divide the annual interest rate by the number of compounding periods in a year and add 1. Raise the result to the number of periods in your time frame, then multiply by the principal. The calculator runs that math period by period and adds each contribution as it goes in. That also makes it a future value calculator for a lump sum, regular deposits or both.

A higher compounding frequency adds a little. On the example plan, daily compounding ends at $301,636, monthly at $300,851 and yearly at $292,465. The rate and the years matter far more.

Simple interest is paid only on the money you put in, so it grows in a straight line. Compound interest is also paid on the interest already earned, and the gap between the two widens every year the money stays invested.

Say you start with $10,000, add $500 at the end of each month and raise it by 3% each year. The money earns 7% a year, compounded monthly, for 20 years, while prices rise 2.5% a year.

The balance reaches $367,509. Of that, $171,222 is money you put in and $196,287 is interest. In today's dollars it is worth about $224,280.

Without the raise, the same plan ends at $300,851: $130,000 put in and $170,851 of interest. That is the example the calculator opens with.

Inflation lowers what each future dollar buys. As an investment calculator with inflation, this tool divides each year's balance by how much prices have risen at your inflation rate, so you see the inflation-adjusted balance in today's dollars, which is its buying power now.

The growth left after inflation is the real rate of return: (1 + return) / (1 + inflation) - 1. A 7% return with 3% inflation is a real return of about 3.9% a year.

Set an inflation rate to add a row with the balance in today's dollars. Leave it at 0 to see every balance in future dollars.

Regular deposits, such as monthly contributions, do much of the work in a long plan. Pick how often you add money, from weekly to yearly, and whether each deposit goes in at the start or the end of its period.

A deposit made at the start of its period earns one more period of interest. On the example plan, deposits at the start of each month end at $302,370, against $300,851 at the end of each month.

To use this as a compound interest calculator with increasing contributions, set a yearly raise: the yearly increase in what you add, for example to keep pace with your pay.

A yearly raise grows each contribution once a year by the rate you set. At 3%, the example's $500 a month becomes $515 in year 2 and $876.75 in year 20.

As a compound interest calculator for stocks or funds, enter an average annual return as the interest rate. Stock market returns rise and fall from year to year, so the result is one smooth path at that rate: an estimate, not a forecast.

To see what a real stock or fund returned, with dividends reinvested, use the total return calculator.

• The interest rate stays the same every year.
• Contributions follow the schedule you pick and rise once a year by the raise you set.
• When deposits and compounding run on different schedules, each deposit earns the compounding rate converted to its own period.
• There are no taxes, fees or withdrawals.
• Inflation only restates balances in today's dollars. It does not change the rate.
• Investment returns change from year to year, unlike a fixed savings rate. Results are estimates, not a forecast or a promise.