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Compound Interest Calculator

Enter your starting amount, interest rate, and time to see exactly how compounding turns small savings into large ones.

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How compound interest works

Compound interest means each period’s interest is added to the balance and then earns interest itself. Monthly compounding divides the annual rate by 12 and applies it each month, so growth compounds 12 times per year rather than once.

Worked example. Deposit $1,000 at 5% per year, compounding monthly, and leave it for 10 years. The future value is roughly $1,647 — $647 in interest on a $1,000 investment, just from leaving it alone.

The formula

Monthly rate r = annualRate / 12. After n = years × 12 months:

Total future value is the sum of both.

Why time is the biggest lever

Doubling the rate has less impact than doubling the time period, especially in early years. Starting at 25 versus 35 with the same monthly contribution can mean hundreds of thousands of dollars by retirement — this is why the rule of thumb is “start early, even small.”

Frequently asked questions

What is compound interest and how does it differ from simple interest?

Compound interest earns returns on both your original principal and the interest already accumulated, so growth accelerates over time. Simple interest only calculates on the original principal. On $1,000 at 5% for 10 years, simple interest adds $500; compound interest (monthly) grows it to about $1,647.

How much does monthly contribution frequency matter?

Adding even a small fixed amount each month dramatically increases the future value because each contribution starts compounding immediately. In the calculator, set monthly contribution to $100 and watch the future value jump compared to a lump sum alone.