How to read this result
Compound interest means each period's interest is calculated on everything accumulated so far — the starting amount, every contribution, and all earlier interest. That is why the "interest that year" column grows over time even though the rate never changes: the base it applies to keeps getting bigger. In the default scenario above, a $10,000.00 start plus $200.00 a month at a hypothetical 7% becomes $144,572.72 after 20 years, and more than a third of that is interest rather than money paid in.
Two inputs matter more than the rest. Time is the exponent: growth is slow in the early years and steep later, because interest itself starts earning interest. Rate is the other lever — small differences compound into large ones over decades, which is also why no calculator can tell you what a real investment will do: real returns vary year by year instead of arriving at one smooth rate.
How the calculation works
The starting amount grows by the compound formula A = P(1 + r/n)nt, where r is the annual rate and n how often interest compounds per year. Contributions are handled as a monthly annuity: each deposit is added at the end of the month and starts earning interest the following month. The year-by-year table is produced by stepping month by month at the monthly rate equivalent to your chosen compounding frequency, so the year-end balances match the closed-form formula exactly. The full derivation is on the compound interest formula page.
Want the reverse problem — a target amount and a deadline, solved for the monthly deposit? Use the savings goal calculator. Curious how much of the growth comes from compounding itself? The simple interest comparison runs the same inputs both ways. And for a quick mental shortcut, the Rule of 72 estimates how long money takes to double.
Frequently asked questions
What is compound interest, in one sentence?
It is interest earned on interest: each period, the interest you have already earned is added to the balance and itself starts earning interest.
How much difference does compounding frequency make?
Less than most people expect. At the same nominal rate, daily compounding beats annual compounding, but the gap is small next to the effects of the rate itself and the number of years. The APY line above the results converts any frequency into one comparable effective annual rate.
When exactly are monthly contributions added?
At the end of each month, after that month's interest is credited — the standard "ordinary annuity" convention. A deposit made at the start of the month instead would end slightly higher.
Does this calculator account for taxes, fees or inflation?
No. Results are gross, nominal estimates. Taxes and fees would reduce them, and inflation would reduce what the final amount can buy.
Is 7% a realistic rate to assume?
It is a commonly used classroom illustration, nothing more. It is not the rate of any product, and past market performance does not predict future results. Treat every number here as "what the maths would look like if the rate really were constant", not as a forecast.