Compound Interest Calculator

How compound interest works

Compound interest means you earn interest on your original amount and also on the interest it has already earned. For a lump sum, the balance is A = P(1 + r/n)^(nt). P is the starting amount, r is the annual rate as a decimal, n is how many times per year interest is compounded and t is the number of years.

Adding monthly deposits

This calculator can also add a fixed deposit at the end of every month. Each deposit then earns interest for the months that remain. The final balance is the growth of the starting amount plus the growth of all the deposits.

Worked example

Start with $1,000 at 5% a year for 10 years, compounded monthly. The balance is 1,000 × (1 + 0.05 / 12)^120, which is about $1,647.01, so you earn about $647 in interest. If you also add $100 at the end of every month, you put in $13,000 in total ($1,000 plus 120 deposits of $100) and the balance reaches about $17,175.24.

Why compounding frequency matters

More frequent compounding gives slightly more interest. At 5% for one year on $1,000, annual compounding earns $50.00, monthly compounding earns $51.16 and daily compounding earns $51.27. The effective annual yield (APY) in the results lets you compare accounts that compound on different schedules.

Things to keep in mind

• The result is an estimate. Real accounts may compound or credit deposits on different schedules.
• Rates are not guaranteed. Savings rates change, and investment returns vary from year to year.
• Fees and taxes reduce your real return, and inflation reduces what the money can buy.
• Time is the biggest factor. The same deposits grow far more over 30 years than over 10.

Related calculators

For interest that is not compounded, use the simple interest calculator. To plan a loan instead of savings, try the mortgage calculator.