Use this free compound interest calculator to estimate how an initial amount can grow over time with compound interest and optional monthly contributions.
How Compound Interest Works
Compound interest means that interest can be earned on both the original principal and previously accumulated interest. Over longer periods, compounding can have a substantial effect on the future value of money.
Compound Interest Formula
For the starting amount, the basic formula is:
A = P(1 + r/n)nt
Where P is the starting principal, r is the annual interest rate as a decimal, n is the number of compounding periods per year, and t is time in years.
Recurring Contributions
This calculator also allows monthly contributions. Contributions are added monthly and then participate in subsequent growth. Because contribution timing and compounding frequency can differ among real accounts, the result is an estimate.
Example
If you start with $10,000, contribute $200 each month and earn an average annual return of 7%, the calculator estimates how much the account could grow over 10 years.
Important Considerations
Actual investment returns are not guaranteed and may vary substantially. Taxes, fees, inflation, market losses and other factors are not included unless specifically stated.
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Understanding Compound Interest
Compound interest is interest calculated on both
the original principal and previously accumulated
interest. Unlike simple interest, compounding can
accelerate savings growth over time.
How Is Compound Interest Calculated?
For a fixed annual interest rate without additional
deposits or withdrawals, the formula is:
A = P × (1 + r/n)^(n × t)
A = final balance; P = starting principal;
r = annual interest rate expressed as a decimal;
n = compounding periods per year;
t = time in years.
Worked Example
Suppose you deposit $10,000 at a fixed annual
interest rate of 5%, compounded monthly,
for 10 years without making additional deposits.
The estimated final balance is $16,470.09,
including approximately $6,470.09 in interest.
How Compounding Frequency Affects Growth
Interest may compound annually, quarterly,
monthly, or daily. At the same stated annual
rate, more frequent compounding generally
produces a slightly higher final balance.
Compound Interest vs. Simple Interest
Simple interest is calculated only on the
original principal. Compound interest also
earns interest on previously accumulated
interest. Over longer periods, this difference
can become substantial.
Frequently Asked Questions
Does compound interest guarantee investment growth?
No. The formula assumes a fixed positive rate.
Actual investment returns can fluctuate, and
investments may lose value.
What happens when I make regular contributions?
Additional deposits can increase the final
balance. Calculating their effect requires
accounting for contribution amounts, timing,
and compounding frequency.
Does inflation affect compound interest?
Yes. Inflation reduces the purchasing power
of money over time. A growing account balance
does not necessarily mean the same increase
in purchasing power.
Educational estimates only. Actual results
depend on rates, fees, taxes, and account terms.