What is compound interest?
Compound interest means you earn interest on your interest. Each period, the interest is added to your balance, so the next period's interest is calculated on a bigger number. Over long periods the effect is dramatic: the final years usually add more than the first ones.
How this calculator works
Your annual rate is converted to an equivalent monthly growth rate based on how often interest compounds. Each month the balance grows by that rate and your contribution is added at the end of the month.
The rule of 72
A quick way to estimate doubling time: divide 72 by the annual rate. At 6% a lump sum doubles in roughly 12 years.
Frequently asked questions
Does compounding frequency matter much?
A little. Daily compounding beats yearly compounding at the same rate, but the difference is small compared with the rate itself and how long you stay invested.
Are investment returns guaranteed?
No. Savings accounts pay a stated rate, but investment returns vary year to year and can be negative. Use this tool for illustration, not as a promise of returns.