In short
Compound interest means you earn interest not only on the money you deposit but also on the interest it has already earned. This calculator shows how a starting amount, and optional monthly deposits, grow over time at a given interest rate and compounding frequency.
How compound interest works
With simple interest, 10,000 at 5% earns 500 every year. With compound interest, the first year's 500 is added to the balance, so the second year's interest is calculated on 10,500, and so on. The effect is small at first and grows every year.
The formula for a single deposit is: balance = P × (1 + r/m)^(m × t), where P is the starting amount, r is the annual rate, m is how many times a year interest is added and t is the number of years.
Worked example
Put 10,000 in an account paying 5% a year for 10 years. Compounded once a year, it grows to 16,288.95. Compounded monthly, it grows to 16,470.09, and compounded daily to 16,486.65. More frequent compounding helps, but much less than a higher rate or a longer period.
Add a deposit of 200 every month at 6% compounded monthly for 20 years, and a starting 10,000 grows to about 125,510. You deposit 58,000 in total; the other 67,510 is interest.
The rule of 72
A quick way to estimate how long money takes to double: divide 72 by the annual interest rate. At 6%, money doubles in about 12 years; at 9%, in about 8 years. The calculator gives the exact figure, but the rule is useful for comparing options in your head.
How to make compounding work for you
Start early: time is the most powerful part of the formula.
Keep adding: regular deposits, even small ones, compound as well.
Compare the effective annual rate (often shown as APY or AER): it already includes the compounding frequency, so it is the fairest way to compare accounts.
Watch out for fees and inflation, which reduce what your money can really buy.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount. Compound interest is paid on the original amount plus the interest already earned, so the balance grows faster over time.
Which compounding frequency should I choose?
Use the frequency your bank or product states: savings accounts often compound daily or monthly, some deposits yearly. If you are unsure, monthly is a reasonable default.
How are monthly deposits handled?
Each deposit is added at the end of the month and then earns interest from the following month, using the monthly equivalent of the chosen compounding frequency.
Does the result include tax or inflation?
No. Interest may be taxable where you live, and inflation reduces what the final balance can buy. Treat the result as a before-tax, nominal estimate.
Methodology
Interest compounds at the chosen frequency. To combine that frequency with monthly deposits, the equivalent monthly rate (1 + r/m)^(m/12) − 1 is applied each month, which gives exactly P × (1 + r/m)^(m × t) when there are no deposits. Values are rounded for display only.
This calculator gives estimates for information only and is not financial advice. Actual interest depends on your bank's terms, fees and taxes.
Last reviewed: