Compound Interest Calculator
Compound interest is interest earned on both your original principal and on interest already accumulated. Enter a starting amount, rate, time period, and optional regular contributions to see how your balance grows.
How the Compound Interest formula works
For a lump sum with no additional contributions:
A = P × (1 + r/n)^(n×t)
Where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times interest compounds per year, and t is time in years. When regular contributions are added, each contribution compounds for the remaining time it stays in the account, and the calculator sums the future value of the initial principal with the future value of the contribution series.
Step-by-step calculation
- Convert the annual rate to a decimal and divide by the compounding frequency.
- Raise (1 + rate per period) to the power of total periods.
- Multiply by the principal to get the lump-sum future value.
- If contributions are included, add the future value of each periodic contribution.
- Subtract total contributions from the final balance to find total interest earned.
Worked example
$10,000 invested at 7% annual interest, compounded monthly, for 20 years, with no further contributions: A = 10,000 × (1 + 0.07/12)^(12×20) ≈ $40,387. That's roughly $30,387 in interest earned on top of the original $10,000.
Frequently asked questions
How does compounding frequency affect returns?
More frequent compounding (daily or monthly versus annually) results in slightly higher returns for the same nominal rate, because interest starts earning its own interest sooner.
What's the difference between compound interest and simple interest?
Simple interest is calculated only on the original principal each period. Compound interest is calculated on the principal plus all previously accumulated interest, so growth accelerates over time.
Should I include regular contributions?
Yes, if you plan to add money regularly (like a monthly savings deposit) — including contributions gives a much more realistic long-term projection than a single lump sum alone.
Does this account for inflation?
No, the result is a nominal future value. To estimate purchasing power, you would separately discount the result by an assumed inflation rate.