How to use the compound interest calculator
- Enter your starting amount and the regular contribution, and choose monthly or annual contributions.
- Choose whether contributions go in at the start or the end of each period.
- Enter the annual interest rate you want to assume and the compounding frequency.
- Set the number of years and, optionally, an inflation rate to see the result in today’s money.
- Review the future value, the split between contributions and interest, and the year-by-year table.
Worked example
$10,000 plus $200 a month at 5% compounded monthly for 10 years
With contributions at the end of each month the balance grows to $47,526.55. You put in $34,000 in total, so $13,526.55 is interest. The effective annual rate of 5% compounded monthly is 5.116%.
How it works
The nominal rate r compounded m times a year is converted to an equivalent rate per contribution period i = (1 + r/m)m/p − 1, where p is 12 for monthly or 1 for annual contributions. Each period: balance × (1 + i), with the contribution added before (start of period) or after (end of period). This reproduces the closed forms FV = P(1 + r/m)mt for a lump sum and C × ((1 + i)n − 1) / i for an annuity (× (1 + i) when contributions are at the start). The inflation-adjusted value divides by (1 + inflation)years.
Assumptions
- The interest rate is your own assumption and is constant every year. Real investment returns vary and can be negative.
- No taxes or fees are deducted.
- When contributions are more frequent than compounding, the equivalent periodic rate is used, so interest effectively accrues on each contribution from the day it is made.
Frequently asked questions
How much difference does compounding frequency make?
Less than people expect at typical rates. 5% compounded monthly is an effective 5.116% a year; compounded daily it is about 5.127%. Contributions and time matter far more.
Should contributions be at the start or end of the period?
Money added at the start of each period earns one extra period of interest. Pick the option that matches when you actually deposit.
What does the inflation adjustment show?
It divides the future balance by cumulative inflation so you can see its approximate purchasing power in today’s money. The inflation rate is your own estimate.
Is this investment advice?
No. It is a calculator for exploring scenarios. Returns are not guaranteed.
Limitations
- Constant rate only; does not model market volatility, taxes or fees.
- Contributions are fixed; it does not increase them over time.