How to use this calculator
- Enter or choose initial amount.
- Enter or choose interest rate (per year).
- Enter or choose years.
- Enter or choose compounding.
- Enter or choose monthly contribution.
- The final balance updates as you type. Use Copy result or Share to keep it.
Formula
A = P × (1 + r ÷ k)^(k × t)
- A
- final amount
- P
- initial amount
- r
- annual rate as a decimal
- k
- compounding periods per year
- t
- years
Worked example
- P = $10,000, r = 0.05, compounded yearly so k = 1, t = 10.
- A = 10,000 × (1 + 0.05)^10 = 10,000 × 1.628895 = $16,288.95.
- Interest earned = 16,288.95 − 10,000 = $6,288.95.
After 10 years the balance is $16,288.95. Simple interest at the same rate would give only $15,000.
What the result means
More frequent compounding raises the effective annual rate slightly: 5% compounded monthly is about 5.12% a year. Time matters far more than frequency; the curve gets steeper the longer money is left to grow.
Assumptions and limits
- The rate stays constant.
- Monthly contributions are added at the end of each month.
- With contributions, the stated compounding frequency is converted to an equivalent monthly rate.
- Taxes, fees and inflation are not deducted.
- Real investment returns vary from year to year; a fixed rate is a simplification.
Questions
What is the difference between compound and simple interest?
Simple interest is paid only on the original amount. Compound interest is also paid on interest already earned, so the balance grows faster each year.
What is the rule of 72?
Divide 72 by the annual rate to estimate how many years it takes money to double. At 6%, money doubles in about 12 years. It is an approximation; this calculator gives the exact figure.
Sources
Please note: This calculator gives estimates for planning. It is not financial advice, and lenders’ actual terms, fees and rounding may differ.