The power of compound interest, explained.
Compound interest means earning interest on both your original investment and the interest accumulated over time. The longer money stays invested, the more opportunities it has to compound. Regular contributions can increase the amount working toward your financial goals.
Compound interest formula
For an initial investment without additional contributions, the standard formula is:
When recurring deposits are included, each contribution also earns interest for the time it remains invested.
A practical example
Imagine investing $10,000 at a 5% nominal annual interest rate, compounded annually, for 10 years, without additional deposits.
You started with $10,000 and earned approximately $6,288.95 in interest. That additional growth came from compounding rather than new deposits.
Try changing the interest rate or adding monthly contributions in the calculator above to see how the outcome changes.
How does this compound interest calculator work?
The calculator projects investment growth using your initial balance, nominal annual interest rate, compounding frequency, investment duration and optional recurring deposits.
How interest is calculated
The nominal annual interest rate is converted into an effective annual rate based on the selected compounding frequency. The calculator then uses an equivalent monthly growth rate to calculate the balance month by month.
This supports comparisons between annual, quarterly, monthly and daily compounding while maintaining a consistent monthly projection timeline.
How recurring deposits are handled
Monthly, quarterly or annual contributions are added according to your selected schedule. Deposits made at the beginning of a contribution period earn interest sooner than deposits made at the end.
Total interest equals the projected final balance minus the initial investment and all recurring contributions.
What assumptions does the calculator make?
The entered annual interest rate is assumed to remain constant throughout the projection. Results are calculated using a monthly timeline, with investment duration measured in whole months.
The projection does not automatically deduct investment fees, taxes or inflation. Currency selection changes the displayed currency, not the underlying exchange rate.
How should you interpret the results?
Future value is the estimated ending balance. Total invested is the sum of your initial principal and additional contributions. Interest earned is the difference between future value and total invested.
Negative interest represents a projected loss rather than positive investment growth. These results are illustrations, not guaranteed investment returns.
How much can $10,000 grow in 10 years?
Compare compound interest with and without monthly deposits. Both examples assume a 5% nominal annual interest rate, monthly compounding and a 10-year investment period.
Projected future value comparison
Deposit timing matters
Depositing $200 at the beginning of each month produces $47,655.95, compared with $47,526.55 at month-end. That is $129.40 more.
Compounding frequency matters
With no deposits, daily compounding grows $10,000 to $16,486.65, versus $16,288.95 with annual compounding, a difference of $197.70.
Illustrative calculations at a fixed 5% nominal annual rate over 10 years. No taxes, fees or inflation adjustments. Results are not guaranteed investment returns.
Frequently asked questions
Quick answers to help you understand compounding, contributions and projected returns.
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus interest accumulated in previous periods. This creates the potential for accelerating growth over time.
Does daily compounding earn more than monthly compounding?
At the same positive nominal annual interest rate, daily compounding generally produces a slightly higher effective annual yield than monthly compounding. The difference depends on the rate and investment duration.
Can I include monthly contributions?
Yes. This calculator supports monthly, quarterly and annual recurring contributions. You can also choose whether deposits occur at the beginning or end of each contribution period.
Are the projected returns guaranteed?
No. Results are mathematical projections based on the values you enter. Actual investment returns may vary, and taxes, fees and inflation can affect your real returns.
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