Our Compound Interest Calculator helps you estimate how savings and investments can grow over time through the power of compounding. Enter your principal, interest rate, time horizon, and optional recurring contributions to see your projected future value, total contributions, and interest earned.
What is Compound Interest?
Compound interest is the interest calculated on both your initial principal and the accumulated interest from previous periods. Unlike simple interest, which is only applied to your principal, compound interest reinvests earned interest back into the balance. This creates a snowball effect that can significantly increase your returns over time.
How to Use the Compound Interest Calculator
- Enter your Initial Principal: the starting amount you plan to invest or save.
- Provide the Annual Interest Rate (in %): your expected average annual return.
- Set the Time Horizon in years: how long you plan to leave the money invested.
- Choose the Compounding Frequency: annually, quarterly, monthly, weekly, or daily.
- Optional: Add a Recurring Contribution and Frequency: simulate ongoing deposits.
- Optional: Choose Contribution Timing: at the end or beginning of each period.
After clicking Calculate, you will see the final balance, total contributions, and the total interest earned. You can adjust inputs to compare different scenarios and strategies.
Why Compounding Frequency Matters
The compounding frequency determines how often interest is added to your balance. More frequent compounding means interest is calculated and reinvested more often, typically resulting in a higher final amount. For example, monthly compounding usually yields a slightly higher balance than annual compounding at the same annual rate.
Common Compounding Options
- Annually (1x per year)
- Semi-Annually (2x per year)
- Quarterly (4x per year)
- Monthly (12x per year)
- Weekly (52x per year)
- Daily (365x per year)
Contributions: End vs. Beginning of Period
Selecting end of period means each contribution is added after the interest for that period is applied, which is standard for many savings plans. Choosing beginning of period treats deposits as if they are made at the start of each period, giving them slightly more time to compound and thus a larger future value.
Formula and Behind-the-Scenes Method
The calculator applies the standard compound interest formula for the principal: A = P × (1 + r/n)^(n × t), where P is principal, r is annual rate, n is compounding periods per year, and t is years. For recurring contributions, it uses the future value of a series formula that aligns contribution periods to the compounding schedule, ensuring deposits grow at an effective rate consistent with the chosen compounding frequency.
What You Will Learn
- How different rates and compounding choices change your future balance.
- The impact of making regular contributions over time.
- How long-term horizons amplify the power of compounding.
Tips for Smarter Growth
- Increase contributions gradually to leverage time in the market.
- Compare monthly vs. annual compounding to understand sensitivity.
- Reinvest earnings to maintain the compounding effect.
- Review fees and taxes, which can reduce the realized rate of return.
Example Scenario
Suppose you invest 10,000 at 6% with monthly compounding for 10 years. If you add 200 per month at the end of each month, your final balance can be substantially higher than investing a lump sum alone. Try changing the rate, timeline, or contribution timing to see how the results vary.
Who Can Use This Calculator?
This tool is ideal for savers, investors, students, and anyone planning for long-term goals such as emergency funds, retirement, or education savings. Whether you are just starting or optimizing an existing plan, the calculator helps quantify the impact of your decisions.