Compound Interest Calculator
See how an initial investment plus regular contributions compounds over time at a given rate of return.
What the calculator is doing
This is a straightforward compound-interest simulation. Each compounding period, your balance grows by the periodic interest rate (annual rate divided by compounding periods per year), and your monthly contribution is added to the balance. Compounding monthly means the interest earned this month starts earning interest next month — the "interest on interest" effect that Einstein allegedly (but probably didn't) call the most powerful force in finance.
A note on assumptions
The annual return is assumed to be constant for the entire period. In real markets, returns vary year to year, and sequence-of-returns risk — getting a bad stretch right before you need the money — can meaningfully change outcomes. For long horizons (20+ years), the constant-rate simplification is usually reasonable for planning; for shorter horizons or retirement-withdrawal scenarios, it's less accurate.
Returns here are nominal — not adjusted for inflation. If you want a purchasing-power estimate, subtract your inflation assumption from your return rate. A nominal 7% with 3% inflation gives you ~4% real growth.
How to use the result
The most useful comparison is usually interest earned vs. contributions. In the first few years, most of your balance growth comes from contributions; by year fifteen or twenty, compounding takes over and interest dominates. Extending the timeline by even a few years often has a bigger effect than raising the monthly contribution — which is why starting early matters more than starting with a big number.