How to use the Compound Interest
- Enter your starting balance — zero is fine if you are beginning from nothing.
- Enter the annual rate and choose how often interest is compounded.
- Add a regular contribution if you plan to pay in monthly or annually.
- Set the number of years and compare the final balance against the total you contributed.
How the calculation works
Each compounding period, the balance is multiplied by (1 + rate per period). Over many periods those multiplications stack, which is why the growth accelerates: the same percentage return applies to a larger base each time. Frequency has a modest but real effect — daily compounding at the same nominal rate beats annual compounding, and the gap widens with the rate.
When regular contributions are included, each deposit compounds only for the time remaining, so early contributions do far more work than late ones. In a thirty-year projection, money paid in during the first five years often accounts for a disproportionate share of the final balance. This is the mathematical case for starting small and early rather than waiting to start large.
A = P(1 + r/n)^(nt) + PMT × [ ((1 + r/n)^(nt) − 1) / (r/n) ]Source: Standard compound interest and future-value-of-an-annuity formulas.
Worked example
7,400 invested at 6.2% compounded monthly, plus 275 added every month for 18 years.
- Rate per period r/n = 0.062 / 12 = 0.0051667; periods nt = 216.
- Growth factor (1.0051667)^216 ≈ 3.0466.
- Lump sum grows to 7,400 × 3.0466 ≈ 22,545.
- Contributions grow to 275 × (3.0466 − 1) / 0.0051667 ≈ 275 × 396.1 ≈ 108,930.
Final balance ≈ 131,475 from 66,800 of your own money — roughly 64,675 of it is compounded growth.
Frequently asked questions
How much difference does compounding frequency make?+
Less than most people assume. At 6%, moving from annual to monthly compounding adds roughly a sixth of a percentage point of effective yield. Rate, contribution size and time all matter far more.
Are these results adjusted for inflation?+
No, the projection is nominal. To see the result in today's purchasing power, subtract an inflation assumption from your return — a 7% return with 3% inflation is a 4% real rate.
Should I use this for a stock market projection?+
Only as a smoothed illustration. Markets return an average over decades, not a fixed rate each year, so a real portfolio will be above and below this curve repeatedly even if it ends near it.
Does the calculator account for tax on the interest?+
No. In a taxable account, interest and dividends are usually taxed as they are received, which reduces the amount available to compound. For a tax-sheltered account the untaxed figure is the right one.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.