Compound Interest Calculator United States

Compound interest lets a modest amount saved consistently grow into a large sum over time. This compound interest calculator takes a starting balance, a monthly contribution, an interest rate and a number of years, projects the future value with monthly compounding, and splits the total into the money you paid in and the interest earned.

How compound interest works

Simple interest pays a fixed amount on your original deposit every period. Compound interest calculates each period’s interest on the original balance plus all interest already credited, so the balance grows faster each year. The effect is small at first and large later, which is why the time money stays invested matters at least as much as the amount.

The calculator divides your annual rate by twelve and applies that monthly rate to your balance every month. Each monthly contribution starts compounding when it is added, so deposits made in year one have far longer to grow than those made in year nine.

The formula behind the numbers

Your starting balance and your monthly contributions both grow. The starting balance grows by the compound factor: principal times one plus the monthly rate, raised to the number of months. The contributions are an annuity, whose future value is the monthly amount times ((one plus the monthly rate) raised to the number of months, minus one), divided by the monthly rate. The two together give the projected future value.

At a zero rate the calculator adds your starting balance and every contribution, so $10,000 plus $200 a month for ten years gives exactly $34,000, all of it money paid in.

Money paid in versus interest earned

Total money paid in is your starting balance plus your monthly contribution times the number of months. Interest earned is the future value minus that total. The donut chart shows both.

Early in a savings plan the paid-in part dominates. As the years pass, the interest part grows faster than the contributions, and over long horizons it can overtake them.

A worked example

Suppose you start with $10,000, add $200 a month, and assume a 7 percent annual return over ten years. The monthly rate is about 0.583 percent over 120 periods. The starting balance grows to just over $20,000 and the contributions to about $34,600, for a future value of roughly $54,700. Of that, $34,000 is money you paid in and about $20,700 is interest. Over twenty or thirty years the interest portion grows much faster than the contributions.

Assumptions and limitations

This is a planning estimate, not a guarantee. It assumes a constant interest rate, contributions at the end of each month, and monthly compounding throughout. Real returns are rarely constant: savings rates change and market portfolios can swing widely, which a steady average hides. The projection is nominal and before tax; it does not deduct tax on interest or gains or adjust for inflation, so the real spending power of the final balance will be lower. Use it to compare scenarios and treat the exact figure as an approximation.

About This Compound Interest Calculator

Use this compound interest calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.