How to use this calculator
- Enter your starting amount. If you're only making monthly deposits with no lump sum, enter 0.
- Enter any recurring monthly contribution — or leave it blank if you're investing a lump sum only.
- Enter the annual return (%) you expect and your time horizon in years.
- Choose the compounding frequency. If you contribute monthly, monthly compounding is the better model.
- Hit Calculate to see your future balance, total contributions, total profit, growth multiple, and Rule of 72 doubling time.
How compound interest works
With principal P, annual return r (as a decimal), and t years, this calculator uses the following formulas:
| Mode | Formula |
|---|---|
| Annual · lump sum | FV = P × (1+r)t |
| Annual · contributions (yearly approximation) | A = monthly amount × 12, FV = A × ((1+r)t − 1) ÷ r |
| Monthly · lump sum | i = r/12, n = t×12, FV = P × (1+i)n |
| Monthly · contributions | FV = monthly amount × ((1+i)n − 1) ÷ i |
If the return is 0%, no interest accrues, so the future balance simply equals the total you paid in. Note that annual mode approximates monthly deposits by bundling them into one yearly contribution, so when you save monthly, the monthly compounding mode tracks your real cash flow more closely.
Here's a worked example that shows why compounding matters. Invest $10,000 at 5% per year for 20 years. With simple interest you'd end up with 10,000 × (1 + 0.05 × 20) = $20,000. With annual compounding you get 10,000 × 1.0520 = $26,532.98 — about $6,533 more from the exact same rate and time frame. Switch to monthly compounding and the balance rises further to $27,126.40, because interest is credited twelve times a year and starts earning its own interest sooner.
| Method | Balance after 20 years ($10,000 at 5%/yr) |
|---|---|
| Simple interest | $20,000.00 |
| Annual compounding | $26,532.98 |
| Monthly compounding | $27,126.40 |
This calculator produces pre-tax nominal estimates and ignores taxes, fees, and inflation. Actual investment results depend on the product, market performance, and how your gains are taxed.
Good to know
The Rule of 72. To estimate how long it takes money to double, divide 72 by the annual return in percent. At 4% that's about 18 years; at 6%, about 12 years; at 8%, about 9 years. The exact answer is log(2) ÷ log(1+r) — at 7%, the rule says 10.3 years while the exact figure is 10.24 — so within the typical 4–12% range the shortcut is accurate enough for back-of-the-envelope planning.
Time is the main ingredient. Early on, compound growth looks barely different from simple interest, but because interest earns interest, the curve steepens dramatically in later years. Contributing $500 a month at 6% with monthly compounding grows to about $81,940 after 10 years — roughly $21,940 of profit on $60,000 contributed. Carry the same plan to 20 years and the profit share grows far faster than the contributions do. Starting early and staying invested usually beats chasing a slightly higher rate.
Watch the growth multiple, not just the profit. The growth multiple (future balance ÷ total contributed) lets you compare rate-and-time combinations at a glance. Try nudging the return by one percentage point or extending the horizon in five-year steps to see how sensitive your plan is — small changes compound into large differences over decades.
How $10,000 grows
The table below shows the future value of a one-time $10,000 investment with annual compounding — no monthly contributions, before taxes and fees. Notice how the gaps between the columns widen over time: because each year's interest itself starts earning interest, a higher rate doesn't just add returns, it multiplies them, and the effect snowballs the longer the money stays invested.
| Annual return | After 10 years | After 20 years | After 30 years |
|---|---|---|---|
| 5% | $16,289 | $26,533 | $43,219 |
| 7% | $19,672 | $38,697 | $76,123 |
| 10% | $25,937 | $67,275 | $174,494 |
Working toward a target date, like retirement or a home purchase? Use the Date Calculator to count the exact days until your goal.
Frequently asked questions
How big is the difference between simple and compound interest?
Simple interest is earned on the principal only, while compound interest is also earned on previously earned interest. Invest $10,000 at 5% per year for 20 years: simple interest grows it to $20,000, while annual compounding grows it to $26,532.98. The gap widens exponentially the longer the money stays invested.
What is the Rule of 72?
The Rule of 72 is a quick mental shortcut for estimating how long it takes an investment to double: divide 72 by the annual return in percent. At 6% per year, 72 ÷ 6 = about 12 years; at 8%, about 9 years. It's an approximation, but for returns between roughly 4% and 12% the error is small enough for everyday planning.
Is monthly compounding better than annual compounding?
At the same stated annual rate, yes — slightly. Interest is added to the balance more often, so it starts earning interest sooner. $10,000 at 5% for 20 years grows to $26,532.98 with annual compounding but $27,126.40 with monthly compounding. In practice, the compounding schedule is set by the product, so use both modes here to compare.
Does this calculator account for taxes, fees, or inflation?
No. Results are pre-tax nominal estimates. Real-world returns are reduced by capital gains or income taxes, fund expense ratios, trading fees, and inflation. Treat the output as an upper-bound planning figure rather than a promised outcome.
Why do annual and monthly modes give different results when I add a monthly contribution?
In annual mode, the calculator approximates your contributions by bundling them into a yearly deposit (monthly amount × 12). Monthly mode applies interest month by month, which matches the actual cash flow of regular deposits much more closely — so if you contribute monthly, prefer the monthly compounding mode.