Compound interest calculator
Compound interest is the return generated on both your principal and the interest already earned. With $5,000 to start, $200 a month and a 6% annual return, in 20 years you'd have about $108,000, of which roughly $55,000 is interest. The earlier you start, the bigger the share you didn't have to put in yourself.
Formula: Final balance = P0 × (1 + i)^n + PMT × ((1 + i)^n − 1) / i, where i is the monthly return and n is the number of months.
Compound interest calculator
Enter your starting balance, what you add each month and the return you expect. Interest compounds monthly.
Estimate calculated in your browser. No data is sent or stored.
How to use it
- Enter your starting balance. The money you already have invested today.
- Add your monthly contribution. What you put in on a regular basis each month.
- Set a return and time frame. Use a conservative return (4–7% a year for a diversified portfolio) and the years you'll keep investing.
- Read the result. Compare total contributions with interest earned: that gap is the effect of compounding.
Why time matters more than returns
Compound interest grows exponentially with time but only linearly with contributions. Adding five years to your horizon usually moves the final number more than bumping the expected return by a point, and it doesn't depend on timing the market.
- Starting ten years earlier can double your final balance
- Regular contributions smooth out your average entry price
- Reinvesting dividends is what actually powers compounding
What return to use, honestly
Always work with conservative nominal returns and subtract inflation and fees afterward. A globally diversified portfolio has historically returned around 7% nominal a year over the long run, but projecting with 5–6% leaves room for bad years and product costs.
Frequently asked questions
- How often does this calculator compound interest?
- Monthly. The annual return you enter is divided by twelve and applied each month, which is how most funds and recurring-contribution plans work.
- Does the result account for inflation and taxes?
- No. The final balance is in nominal dollars, before taxes. For a figure in today's purchasing power, subtract expected inflation from the return (for example, use 4% instead of 6%).
- What's the difference between simple and compound interest?
- Simple interest is always calculated on the original principal; compound interest is calculated on the principal plus interest already earned, so the gap widens sharply over time.