Compound Interest Calculator
Project how an initial deposit grows over time when interest compounds monthly, with an optional recurring monthly contribution added to the balance.
How this calculator works
The starting balance grows using A = P(1 + r/12)^(12t), where P is the principal, r is the annual interest rate, and t is the number of years. Monthly contributions grow separately using the future value of an annuity formula and are added to that result.
All growth in this calculator compounds monthly, which is a common convention for savings and investment accounts.
Formula reference: Investopedia: Compound Interest
Example
Example: $5,000 invested at a 7% annual return, compounded monthly, with a $200 monthly contribution for 20 years grows to roughly $124,400. Of that, $53,000 came from the initial deposit plus contributions, and about $71,400 is investment growth.
Frequently asked questions
- Why monthly compounding instead of daily or annual?
- Monthly compounding is a reasonable approximation for most savings accounts and investment projections. Daily compounding produces a very similar result for typical timeframes; annual compounding produces a slightly lower one.
- Does this account for inflation?
- No, the projection is in nominal (today's) dollars. Long-term purchasing power will be lower than the raw number shown once inflation is factored in.
- Is a fixed annual return realistic?
- Real investment returns vary year to year. This tool assumes a constant average rate to make long-term projections easy to understand, not to predict actual market performance.
This calculator provides estimates for general informational purposes only and does not constitute financial, tax, or legal advice. Always confirm important numbers with a qualified professional or your lender/institution before making a decision.