Compound interest is interest earned on both your original money and the interest it has already earned — the famous “snowball effect” that Albert Einstein allegedly called the eighth wonder of the world. Unlike simple interest, which only pays on the principal, compounding accelerates over time: the longer your money stays invested, the faster it grows.
The numbers are striking. $10,000 invested at 8% annual return becomes about $21,590 after 10 years — but leave it for 30 years and it reaches roughly $100,630, with no extra effort from you. Add $200 a month and that 30-year figure climbs past $300,000. Time is the most powerful ingredient, which is why starting early beats investing more later.
This calculator compounds at your chosen frequency (daily compounding grows slightly faster than annual), and optionally includes regular monthly contributions so you can model a realistic savings or retirement plan.
How to use the Compound Interest Calculator
- Enter your initial deposit — the lump sum you are starting with.
- Add a monthly contribution if you plan to keep saving (enter 0 for a one-time deposit).
- Set a realistic annual rate: ~4–5% for high-yield savings, ~7–10% for long-term stock market averages.
- Choose the time horizon in years and the compounding frequency.
- Click Project growth to see your future balance, total contributions, and interest earned.
Tips for accurate results
- Starting 10 years earlier matters more than earning 2% extra return — time dominates the math.
- Reinvest dividends and interest; withdrawing them breaks the compounding chain.
- Compare after-tax, after-inflation returns for a realistic picture of purchasing power.
- Automate monthly contributions so you never miss a deposit.
Simple vs. compound interest
With simple interest, $10,000 at 8% earns exactly $800 every year — $8,000 over a decade. With annual compounding, the same deposit earns about $11,590 over ten years, because each year's interest starts earning its own interest. The gap widens every year, which is why compound growth curves bend upward so dramatically.
Frequently asked questions
What is compound interest?
Compound interest is calculated on the initial principal plus all previously accumulated interest. Each compounding period, your balance grows a little faster than the last.
How often should interest compound?
More frequent compounding (monthly or daily vs. annually) yields slightly higher returns. The difference is small at low rates but meaningful over decades.
What is a realistic return to assume?
US high-yield savings accounts pay around 4–5% (2024–2026), while the S&P 500 has averaged roughly 10% annually before inflation over the long run. Use conservative figures for planning.
Does this calculator account for taxes or inflation?
No — it shows nominal growth. For real purchasing power, subtract your expected inflation rate (historically ~2–3% in the US) from the assumed return.