Compound Interest Calculator

What is a compound interest calculator?

A compound interest calculator shows how a sum of money grows when interest is earned on both your original principal and on the interest already added. Enter a starting amount, an annual rate, a number of years and a compounding frequency, and the tool returns your final balance and the interest earned. Add an optional monthly contribution and it folds your regular deposits into the same projection.

The difference from simple interest is the whole point: simple interest pays only on the principal, while compound interest pays on a growing base, so the curve bends upward over time. This tool is part of our finance calculators collection and is built for quick, repeatable “what if” planning.

How is compound interest calculated?

The principal grows by the standard compound interest formula:

A = P × (1 + r/n)^(n·t)

Where:

• A = final balance from the principal
• P = principal (the starting amount)
• r = annual interest rate as a decimal (8% = 0.08)
• n = number of times interest compounds per year (annually = 1, monthly = 12, daily = 365)
• t = time in years

If you add monthly contributions, each deposit compounds at the monthly rate i = r/12 over N = 12t months. Their combined future value is:

Contributions FV = PMT × ((1 + i)^N − 1) ÷ i

If the rate is 0%, that term collapses to PMT × N (you simply get back what you paid in). The tool then combines the two pieces:

• Final balance = principal FV + contributions FV
• Total contributed = P + PMT × 12t
• Interest earned = final balance − total contributed

Units matter: keep the rate as an annual percentage (the tool converts it to a decimal), and express the term in whole years. The contribution rate i = r/12 is always monthly, regardless of the compounding frequency you pick for the principal.

Examples

Example 1 — $10,000 at 8% for 10 years, compounded monthly

No contributions. Here r = 0.08, n = 12, t = 10, so n·t = 120:

A = 10000 × (1 + 0.08/12)^120 ≈ 22,196.40

• Final balance ≈ $22,196.40
• Interest earned = 22,196.40 − 10,000 ≈ $12,196.40

Your money more than doubles, and every dollar of that $12,196.40 gain is interest compounding on itself.

Example 2 — the same balance, now adding $100 per month

Keep $10,000 at 8% for 10 years (monthly), but add PMT = 100 each month. The monthly rate is i = 0.08/12 ≈ 0.006667 over N = 120 months:

Contributions FV = 100 × ((1 + 0.006667)^120 − 1) ÷ 0.006667 ≈ 18,294.60

• Principal FV ≈ $22,196.40 (from Example 1)
• Final balance = 22,196.40 + 18,294.60 ≈ $40,491.01
• Total contributed = 10,000 + 100 × 12 × 10 = $22,000
• Interest earned = 40,491.01 − 22,000 ≈ $18,491.01

Adding just $100 a month nearly doubles the final balance, because each deposit gets its own runway to compound.

Example 3 — $5,000 at 6% for 20 years, monthly, plus $200/month

With P = 5000, r = 0.06, n = 12, t = 20 and PMT = 200:

• Principal FV = 5000 × (1 + 0.06/12)^240 ≈ $16,551.02
• Contributions FV = 200 × ((1 + 0.005)^240 − 1) ÷ 0.005 ≈ $92,408.18
• Final balance ≈ $108,959.20
• Total contributed = 5000 + 200 × 12 × 20 = $53,000
• Interest earned ≈ $55,959.20

Over 20 years the interest earned ($55,959.20) actually exceeds everything you put in ($53,000) — the hallmark of long-horizon compounding.

Example 4 — daily compounding on $1,000 at 5% for 3 years

No contributions, n = 365:

A = 1000 × (1 + 0.05/365)^(365·3) ≈ 1,161.82

The balance reaches about $1,161.82, for $161.82 of interest.

How compounding frequency affects growth

More frequent compounding earns slightly more at the same rate, but the gains shrink quickly as you go from yearly to daily. The table below shows $1,000 at 5% for 1 year at each frequency this calculator supports, matching its output:

Compounding	n	Final balance	Interest earned
Annually	1	$1,050.00	$50.00
Quarterly	4	$1,050.95	$50.95
Monthly	12	$1,051.16	$51.16
Daily	365	$1,051.27	$51.27

The jump from annual to monthly adds about a dollar; monthly to daily adds only a few cents. The rate and the time horizon drive far more of your result than the compounding frequency does.

Common uses

• Retirement and long-term saving — project how a lump sum plus monthly deposits could grow over decades.
• Comparing savings accounts or CDs — test the same deposit at different rates and compounding frequencies.
• Goal planning — work out roughly how much to save each month to reach a target balance.
• Understanding debt — the same math powers how credit-card balances grow when interest compounds against you.
• Teaching the time value of money — show, with real numbers, why starting early beats saving more later.

Tips and common mistakes

• Enter the rate as a percentage, not a decimal, in the tool. Type 8, not 0.08 — the calculator converts it. The formula above uses the decimal form.
• Don’t confuse APR with APY. A nominal annual rate compounded monthly produces a higher effective yield; this tool models the nominal rate with your chosen frequency.
• Be consistent with contributions. The monthly deposit is a fixed amount; entering an annual figure by mistake inflates the result roughly twelvefold.
• Remember it is nominal, not real. The output ignores inflation, so a balance 30 years out buys less than the same number today.
• Higher frequency is not a shortcut to wealth. As the table shows, a better rate or a longer horizon matters far more than switching from monthly to daily compounding.

Limitations and accuracy notes

This calculator assumes a constant interest rate, a fixed compounding frequency, and constant monthly contributions made at the end of each month. It does not account for taxes, account fees, variable rates, inflation, or irregular deposits — all of which change real-world outcomes. Figures are rounded to cents for display, so small differences from a hand calculation or a bank statement are normal. It is an educational projection, not a guarantee of future returns.

For more money planning, compare an annualised growth rate with the CAGR calculator, estimate equity gains with the stock profit calculator, or explore borrowing and recurring investing with the loan calculator, SIP calculator and dividend calculator in our finance tools collection.