Compound Interest Calculator
See growth compound, year by year.
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Questions
Why does the balance grow so much faster in later years?
Because interest earns interest. $10,000 at 7% earns $700 in year one; by year thirty the same original deposit is earning over $5,000 a year. Almost all of the growth is at the end, which is why starting early beats contributing more later — someone investing $200 a month from 25 to 35 and then stopping usually ends up ahead of someone who starts at 35 and contributes for thirty years.
How much does compounding frequency actually matter?
Less than most people expect. $10,000 at 6% for ten years gives $17,908 compounded annually and $18,221 compounded daily — a difference of about 1.7%. The effect converges, so continuous compounding is barely better than daily. The rate itself and the time invested matter far more.
What is the effective annual rate?
It folds the compounding frequency into a single number, which is the only fair way to compare accounts quoting different terms. An account offering 4.9% compounded monthly has an effective rate of 5.01%, so it beats one offering 5% compounded annually. Always compare effective rates rather than headline rates.
What is the rule of 72?
Divide 72 by the annual return for a rough number of years to double your money — 12 years at 6%, 8 years at 9%. It is a good mental approximation between about 4% and 12%, and it makes fees vivid: a 2% annual fee on an 8% return turns a nine-year doubling into a twelve-year one.
Does this account for inflation?
No — the figures are nominal. At 2% inflation, money loses roughly a third of its purchasing power over twenty years. A useful trick is to enter your expected return minus inflation, which gives the result in today's dollars. The note under the results shows the inflation-adjusted figure at 2%.
Is a constant rate of return realistic?
No, and no real investment provides one. Markets deliver +20% one year and −15% the next, and the order matters a great deal if you are withdrawing rather than accumulating. Treat a constant rate as a planning tool for seeing the shape of compound growth, not as a forecast.
About compound interest
Why the last decade dwarfs the first
Compound interest is not a straight line. Interest earns interest, so the balance grows on a curve — and almost all of the growth happens at the end. $10,000 at 7% earns $700 in year one. By year thirty it is earning more than $5,000 a year, on the same original deposit.
This is why time in the market matters more than the amount. Someone who invests $200 a month from 25 to 35 and then stops usually ends up ahead of someone who starts at 35 and contributes for thirty years — despite putting in a third as much. The year-by-year table above makes the shape visible: watch the interest column overtake the contributions column.
The rule of 72
Divide 72 by the annual return and you get roughly the number of years for money to double. At 6% that is 12 years; at 9%, 8 years. It is a decent mental approximation anywhere between about 4% and 12%, and it makes the cost of fees vivid: a 2% annual fee on a 8% return turns a nine-year doubling into a twelve-year one.
Compounding frequency matters less than people think
| Compounding | $10,000 at 6% after 10 years |
|---|---|
| Annually | $17,908 |
| Quarterly | $18,140 |
| Monthly | $18,194 |
| Daily | $18,221 |
The gap between annual and daily compounding over a decade is about 1.7%. It is real but small, and it converges — continuous compounding is only marginally better than daily. The rate itself, and how long you leave it, matter far more.
The figure worth comparing is the effective annual rate, shown above. It folds the compounding frequency into a single number, which is the only fair way to compare a savings account quoting 4.9% compounded monthly against one quoting 5% compounded annually.
Two things this does not show
Inflation.The figures are nominal. At 2% inflation, money loses about a third of its purchasing power over twenty years. A useful trick: enter your expected return minus inflation to see the result in today’s dollars.
A steady return does not exist. Real markets deliver +20% one year and −15% the next, and the order matters if you are withdrawing. A constant rate is a planning tool, not a forecast.
Related
Work out what you need to save with the savings goal calculator, or see the same maths from the other side with the loan calculator.