Compound Interest Calculator
Calculate investment growth, future value, and the power of regular contributions
| Year | Balance | Contributions | Interest Earned | % Interest |
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How Compound Interest Works
Compound interest earns returns on both your principal and all previously earned interest. This creates exponential growth — the longer you invest, the faster the growth accelerates. A $10,000 investment at 7% annual return grows to about $19,700 in 10 years, $38,700 in 20 years, and $76,100 in 30 years — without adding a single additional dollar.
Adding regular monthly contributions dramatically accelerates this effect. The same $10,000 starting balance with $500/month at 7% reaches about $264,000 in 20 years — more than 6× the contributions alone.
Compounding Frequency
The more frequently interest compounds, the higher the effective annual rate. Monthly compounding on a 7% nominal rate produces an effective annual rate (EAR) of about 7.23%. Daily compounding gets you to 7.25%. The difference is small but adds up over decades. Most savings accounts use daily compounding; most investment accounts use annual or monthly.
Inflation and Real Returns
Nominal returns are what you see on paper. Real returns account for inflation. At 7% nominal growth and 3% inflation, your real return is roughly 3.9% per year — meaning your purchasing power grows much more slowly than the numbers suggest. This calculator shows both nominal and inflation-adjusted values so you can plan with realistic expectations.
Frequently Asked Questions
- What is the Rule of 72?Divide 72 by your annual return rate to estimate how long it takes to double your money. At 6%, your money doubles in ~12 years. At 9%, in ~8 years. At 3%, in ~24 years. This calculator shows how many doublings occur over your time horizon.
- How much should I save each month to reach $1 million?At 7% annual return, starting from $0: ~$1,000/month gets you to $1M in about 30 years; ~$1,700/month in 25 years; ~$3,000/month in 20 years. Starting earlier is dramatically more effective than contributing more later.
- What is a realistic long-term investment return?The S&P 500 has historically returned ~10% annually before inflation (about 7% after). For planning, 6–8% nominal is a conservative estimate for a diversified stock portfolio. Bonds typically average 2–4%. Use 5–7% for a balanced portfolio.