Compound Interest Calculator

How this calculator works

Frequently asked questions

How is compound interest calculated in this calculator?

It uses the future value formula P x (1 + i)^n + PMT x ((1 + i)^n - 1) / i, where P is the initial amount, PMT the monthly deposit, n the number of months, and i the monthly rate. The monthly rate is derived from the effective annual return as (1 + r)^(1/12) - 1, not r divided by 12, so the annual growth matches the rate you entered exactly. Deposits are credited at the end of each month, and at a 0% return the result is simply the initial amount plus all deposits.

Should I enter a nominal or an inflation-adjusted return?

Enter a nominal return, before inflation. The calculator deflates the final balance by your inflation input to produce the real value, so entering an already inflation-adjusted return would subtract inflation twice. The suggested values of 4%, 6%, and 8% are all nominal and consistent with a 2% inflation assumption; 6% roughly matches the long-run global history of about 5% real equity returns minus fees, plus 2% inflation.

When does interest overtake everything I paid in?

It depends on the return and the horizon. For example, with 10,000 initial, 200 per month, and a 6% annual return, cumulative interest exceeds everything paid in, the initial amount plus every deposit, around year 19. The calculator computes this crossover year for your own inputs and shows it above the chart when it happens within the horizon; from that year on, compounding adds more to the balance than your deposits do.

What does the annual contribution increase do?

It raises the monthly deposit at each 12-month anniversary, so from months 13, 25, and so on. A 3% increase turns a 200 deposit into 206 in the second year, 212.18 in the third, and so on. It is a simple way to model a salary that grows over time or a plan to save more each year.

What is the difference between monthly and annual compounding here?

Monthly is the default and the recommended mode: interest is credited each month and every deposit starts earning from the month it is made. Annual is a simplification that treats the whole year's deposits as a single lump added at year end, so they earn nothing within that year and the result is slightly lower. Because the return is an effective annual rate, the two modes agree exactly when there are no deposits.

Does this calculator include taxes, fees, or market risk?

No. It models gross compounding at a constant return. Taxes on gains, fund fees, and broker charges are not included and vary by country and product, so the achievable net return is usually lower than the gross figure you enter; one workaround is to enter a return net of estimated costs. Real markets also fluctuate, so the smooth curve shown is an average-case scenario, not a guarantee.