§ 01 / TOOL
Compound Interest.
STATUS ACTIVECOMPOUND MONTHLYLATENCY <1MS
> INPUT
MODE MONTHLY COMPOUND
// INITIAL
$
// MONTHLY
$
// RATE
%
// TERM
yrs
ENTER DETAILS ABOVE.
MONTHLY
// READY
Start + add + wait.
Enter an initial amount, a monthly, or both. Monthly compounding is assumed.
§ 02 / ABOUT
Why compounding matters.
Compound interest means you earn interest on your interest, not just on the original balance. The formula is A = P(1 + r/n)^(nt) — with monthly contributions the arithmetic gets messy, but the punchline doesn't: time does most of the work.
// THE THREE LEVERS
- Initial balance — a head start helps, but less than you'd think after 20+ years.
- Monthly contribution — the dominant factor for most people. $500/month for 30 years at 7% is ~$600k.
- Time — the curve is exponential. Most of the growth happens in the last third of the timeline.
// THE RULE OF 72
Divide 72 by your annual return to estimate how many years it takes for money to double. At 7%, money doubles every ~10 years. At 10%, every 7 years. At 4%, every 18. This is why expense ratios and fees matter so much — a 1% drag compounds against you the same way returns compound for you.
Related: ROI, Mortgage, Rent vs Buy.
§ 02 / FAQ
Questions. Answered.
How is compound interest calculated?+
With monthly compounding and regular contributions, the balance at the end of each month equals the previous balance × (1 + r/12) plus the monthly contribution. Over many months, interest earns interest — that’s what "compounding" means. The closed form is FV = P(1+i)ⁿ + PMT × [((1+i)ⁿ − 1)/i] where i = r/12 and n = years × 12.
Why does a small rate difference matter so much?+
Because compounding magnifies gaps. $10,000 at 5% for 30 years is about $44,700. At 7% it’s about $76,100. At 9% it’s about $133,000. Two percentage points double the outcome over 30 years. The longer the horizon, the more the spread widens — this is why getting money invested early beats everything else.
Is this monthly, quarterly, or annual compounding?+
Monthly. That matches most real-world accounts: savings, CDs, brokerages, index funds. The difference between monthly and daily compounding at normal rates is tiny (a few dollars on a large balance over decades), so monthly is a reasonable standard.
What about taxes and inflation?+
This calculator shows the nominal balance — not adjusted for either. Taxes on interest/dividends in a taxable account reduce effective returns; inflation reduces purchasing power. A rough rule of thumb: subtract your long-term expected inflation (2–3%) from the rate to approximate real growth.
Can the initial amount or monthly contribution be zero?+
Yes, one or the other — but not both. Starting at zero and adding $500/month models a pure savings plan (sinking fund). Starting with a lump sum and adding $0 models pure compounding. Both are common use cases.
Does the URL update so I can share or bookmark?+
Yes. As you type, the URL updates to /compound/10000-500-7-30 (initial-monthly-rate-years). Copy the URL bar or use the SHARE button to send the exact scenario to someone.
§ 04 / TOOLS
Related calculators.
§ 05 / READING