How the compound interest calculator works
Every compounding period, interest is added to your balance, and the next period's interest is calculated on that larger balance. Over long periods this snowball effect becomes the biggest source of growth. The calculator converts your annual rate and compounding frequency into an equivalent monthly rate, grows the balance month by month, and adds your contribution at the end of each month.
The formula
For a single deposit: A = P × (1 + r/k)k×t, where P is the deposit, r the annual rate, k the compounding periods per year and t the years. Regular deposits add a future-value-of-annuity term: PMT × ((1 + i)n − 1) / i, with i the monthly rate and n the number of months.
Example
$10,000 at 5% compounded annually grows to $16,288.95 in 10 years; compounded monthly it reaches $16,470.09. Saving $500 a month at 6% for 30 years, with no starting balance, grows to about $502,000 — even though you only deposited $180,000.
Make compounding work for you
Time matters more than almost anything else, so starting early beats saving larger amounts later. Reinvest dividends and interest instead of withdrawing them, and keep fees low: a 1% annual fee can consume a large share of long-term growth. Remember that investment returns vary from year to year; a fixed rate is only an average.
Frequently asked questions
What is the difference between APR and APY?
APR is the simple annual rate. APY includes the effect of compounding during the year, so it is slightly higher whenever interest compounds more than once a year.
Does daily compounding make a big difference?
Compared with monthly compounding, the difference is small. Rate and time matter far more.
What return should I assume for stocks?
Long-run U.S. stock returns have averaged in the high single digits before inflation, but no return is guaranteed. Many people plan with 5%–7% to be conservative.
Are taxes included?
No. Taxes depend on the account type; growth in a 401(k) or IRA is tax-deferred, while a regular brokerage account may owe tax each year.
Results are estimates for educational purposes only and are not financial, tax, legal or medical advice. See our disclaimer. Last reviewed 2026-10-22.