How it works
Compound interest is interest earning interest. This calculator grows an opening balance at your annual rate, adds each month’s contribution, and repeats — the same loop banks, brokerages and retirement accounts use. On the defaults ($10,000 start, $400 a month, 7% a year, 20 years, 3% inflation) the future value is about $248,758. Of that, $106,000 is money you deposited and $142,758 is growth — more than you put in. Deflated at 3% inflation, that pile is worth about $137,731 in today’s purchasing power, which is the number that should drive goals. The engine compounds monthly (twelve periods a year). That is the standard for savings and brokerage cash sweeps; “daily compound interest” searches are usually the same math with a slightly finer period. Over decades the gap between daily and monthly compounding is small next to contribution size and time — a point worth saying plainly when you arrive from a daily-compound SERP. UK and US visitors use the same formula; change the currency symbol in your head, not the rate. What moves the answer most is time and the monthly contribution. Doubling contributions more than doubles the growth gap because every extra dollar rides the whole remaining horizon. Raising the rate by a point over 20 years also compounds into a large difference, which is why fee drag and asset mix matter more than people expect. Use the inflation field so a nominal target does not fool you: half a million in twenty years is not half a million of today’s lifestyle. Pair this page with the savings goal calculator when you know the destination first, and with simple interest when a product truly does not compound.
Formula
Monthly rate r = annual rate / 12 / 100
Each month: balance = balance × (1 + r) + contribution
Contributions may step up once per year by annualIncrease %
Real value = future value / (1 + inflation/100)^years
Worked example — defaults
Start $10,000 + $400/mo · 7% · 20 years · 3% inflation
Future value ≈ $248,758
Total contributed = $10,000 + $400×240 = $106,000
Interest earned ≈ $142,758
In today’s money ≈ $137,731
Daily vs monthly: same rate, more periods — usually a small edge vs contribution size.
Tips
- Judge goals in today’s dollars with the inflation field — nominal future values flatter the plan.
- Contribution size and years beat fretting over daily vs monthly compounding for long horizons.
- Auto-increase contributions annually (even 2%) recreates a salary-raise habit inside the plan.
- For a UK ISA or US brokerage the formula is identical; only the tax wrapper changes the net.
- If a product pays simple interest, switch to the simple-interest calculator — compounding assumptions will overstate it.
Frequently asked questions
- How does a compound interest calculator work?
- It applies your rate to the current balance each period, then adds any contribution, and repeats. This tool uses monthly periods. On the defaults that produces about $248,758 after 20 years from $10,000 plus $400 a month at 7%.
- How often is interest compounded here?
- Monthly. That matches most savings and investment accounts. Daily compounding appears often in search; for multi-year horizons the difference versus monthly is small compared with how much you contribute and how long you stay invested.
- What is a daily compound interest calculator?
- The same compound formula with 365 periods a year instead of 12. Use this page for planning either way: pick a realistic annual rate for the account, keep contributions honest, and read the inflation-adjusted value. Frequency is a fine-tuning knob, not the main lever.
- Can I model withdrawals or forex compounding?
- This hub models contributions and growth, not scheduled withdrawals or FX leverage. For spending down a portfolio later, pair it with a retirement or FIRE calculator; for forex, use a dedicated FX tool — do not treat an investment compound schedule as trading profit and loss.
- What rate should I use for a UK or US account?
- Match the product: cash ISA / HYSA rates for cash, and a long-run real equity assumption (often ~7% after inflation, or ~10% nominal) for stock indexes. The calculator is currency-agnostic — enter pounds or dollars the same way.
- How is this different from a compounding calculator?
- It is the same intent. “Compounding calculator” and “compound interest calculator” both describe growth on growth. This page also tracks contributions and inflation so you see deposits versus earnings and real purchasing power.
- Why does growth accelerate in later years?
- Because each year’s interest sits on a larger base. Early years look slow; later years apply the rate to a balance that already includes decades of growth — the hockey-stick shape on the chart.
- What is the rule of 72?
- Divide 72 by your annual percent rate for a rough doubling time: 8% ≈ 9 years. Use it as a sanity check against this calculator’s table, not as a substitute for contributions.