Compound Interest Calculator
See how your savings grow over time with compound interest and regular contributions.
Inputs
Future Value
$170,619.05
Total Contributions
$70,000
Total Interest Earned
$100,619
Step by step
Periodic rate: Annual rate ÷ compounding periods (monthly)
7.00% ÷ 12
= 0.5833%
Future value of principal: P × (1 + i)ᴺ
$10,000 × (1 + 0.005833)^240
= $40,387.39
Contribution per compounding period (monthly → monthly)
$250.00 × 12 ÷ 12
= $250.00
Future value of contributions: PMT × ((1 + i)ᴺ − 1) / i
$250.00 × ((1 + 0.005833)^240 − 1) ÷ 0.005833
= $130,231.66
Total future value
$40,387.39 + $130,231.66
= $170,619.05
Total interest earned: Future Value − Total Contributions
$170,619.05 − $70,000
= $100,619
How it works
Compound interest earns interest on both your principal and previously earned interest. Adding regular contributions accelerates growth dramatically over time thanks to compounding.
Formulas
Future value of principal
A = P × (1 + r/n)^(n·t)
- A
- Future value of principal
- P
- Initial principal
- r
- Annual interest rate (decimal)
- n
- Compounding periods per year
- t
- Years
Future value of regular contributions
FV_C = PMT × ((1 + i)ᴺ − 1) / i
- FV_C
- Future value of all contributions
- PMT
- Contribution per compounding period
- i
- Periodic rate = r/n
- N
- Total compounding periods = n × t
Compound Interest Calculator — full guide
Why compounding beats intuition
Simple interest pays only on the original amount. Compound interest pays on the amount *plus* all interest already earned, so the balance grows on a curve rather than a line.
£10,000 at 7% for 30 years:
- Simple interest — £31,000
- Compounded annually — £76,123
The extra £45,000 is interest earning interest. Nothing was added; only the compounding differs.
Frequency matters less than people expect
More frequent compounding helps, but with diminishing returns. £10,000 at 5% for 10 years:
| Frequency | Balance |
|---|---|
| Annually | £16,289 |
| Quarterly | £16,436 |
| Monthly | £16,470 |
| Daily | £16,487 |
| Continuously | £16,487 |
The gap between annual and monthly is real; between daily and continuous it is negligible. Rate and time dominate frequency by a wide margin.
The Rule of 72
Divide 72 by the annual rate to approximate the doubling time. At 6%, money doubles in about 12 years. At 9%, about 8. It is accurate enough for mental arithmetic in the 4–12% range and is the fastest way to sanity-check any growth claim.
Time is the variable that matters most
Two savers, both contributing £200 a month at 7%:
- Starts at 25, stops at 35 — contributes £24,000, has about £300,000 at 65
- Starts at 35, contributes until 65 — contributes £72,000, has about £244,000
The first saver contributes a third as much and ends up with more, purely because the money had ten extra years to compound. This is the strongest argument for starting early that exists.
What erodes it
- Inflation. A 7% return with 3% inflation is roughly 4% in real terms.
Always reason in real returns for long horizons.
- Fees. A 1% annual fee sounds small and removes roughly a quarter of the
final balance over 30 years, because the fee compounds too.
- Tax on gains, unless the account is sheltered.
Related tools
- Investment calculator for regular contributions
- Retirement calculator for drawdown planning
- Inflation calculator for real purchasing power
Guides that use this calculator
Projections are estimates and assume a constant rate of return, which real investments do not guarantee.
Frequently Asked Questions
What does compounding frequency change?
More frequent compounding (e.g. daily vs annually) slightly increases your returns because interest is calculated and added more often.
Are contributions added monthly?
Yes, contributions are treated as monthly deposits and grow with the same rate until the end of the period.