Free Compound Interest Calculator
Project the future value of savings with compounding and periodic contributions.
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Future value
$300,850.72
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Short answer
Compound interest is interest earned on both the original principal and previously accumulated interest. The future value formula is A = P(1 + r/n)^(nt), plus PMT contributions if applicable.
What is the Compound Interest Calculator?
Compound interest is the growth mechanism that makes long-horizon investing effective. Each compounding period, interest is added to the balance, and future interest is computed on the new, larger balance.
How does the Compound Interest Calculator work?
Divide the annual rate by the compounding frequency to get the periodic rate. Raise (1 + periodic rate) to the power of total periods, then multiply by principal. Add the future value of periodic contributions.
Formula
Variables
PInitial principalrAnnual interest rate (decimal)nCompounding periods per yeartTime in yearsPMTMonthly contributioniMonthly rate = r/12mTotal months = 12t
Explanation
The first term compounds the initial principal; the second term is the future value of an ordinary annuity for monthly contributions.
Examples
Example 1: $10,000 + $500/mo at 7% for 20 years
Future value ≈ $301,205 on ~$130,000 of contributions — roughly $171,000 of earned interest.
Applications
- Retirement planning
- Long-term savings goals
- Compound investment education
Advantages
- Quantifies the value of starting early
- Isolates contributions from earned growth
Limitations
- Ignores taxes on interest and dividends
- Assumes a fixed rate — real markets fluctuate
- Does not account for inflation unless the rate entered is real (after-inflation)
Common mistakes
- Confusing APR with APY
- Assuming daily compounding meaningfully beats monthly at typical rates
Tips
- Reinvest all interest to preserve compounding
- Increase contributions with income growth to accelerate the curve
Related concepts
The Compound Interest Calculator sits inside the Finance Calculators hub, in the investing & retirement cluster. Growing capital and planning for withdrawal. Understanding the terms below makes the output easier to interpret and easier to compare against neighbouring measures.
Practical use cases and industry applications
Understanding Compound Interest
Compound interest is the growth mechanism that makes long-horizon investing effective. Each compounding period, interest is added to the balance, and future interest is computed on the new, larger balance. Within finance calculators, compound interest belongs to the investing & retirement cluster, where it shares terminology and assumptions with closely related tools.
Learning how compound interest is calculated
The first term compounds the initial principal; the second term is the future value of an ordinary annuity for monthly contributions. Working through the variables one at a time — P, r, n, t, PMT, i, m — makes the result reproducible by hand and easier to sanity-check.
Using compound interest to make a decision
Retirement planning Long-term savings goals Compound investment education Because outputs depend on the assumptions you enter, run more than one scenario before committing to a figure.
How compound interest compares with related measures
compound growth, asset allocation, withdrawal rate, yield all describe adjacent aspects of investing & retirement. Comparing this calculator's output against those measures — using the related tools listed on this page — prevents a single metric from being read in isolation.
Frequently asked questions
What is the rule of 72?
Divide 72 by the annual rate to estimate the years for money to double. At 7% that is roughly 10.3 years.
Should I compound daily?
The difference between daily and monthly compounding at typical rates is small — usually less than 1% over 10 years.
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