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HoldingCost

Compound interest calculator

Visualise how compounding grows an initial deposit and regular contributions over time.

Calculator investments

Logic updated April 2026

This calculator projects an investment balance over time, given an initial deposit, recurring monthly contributions, and an annual rate of return that compounds at the frequency you choose. Compounding is the engine behind long-term wealth — the returns earned on yesterday's returns become tomorrow's returns, which is why time in the market typically matters more than timing it.

How this is calculated

Formula 

Each compounding period: balance = balance × (1 + r) + contributionsThisPeriod ; r = annualRate / periodsPerYear

Step-by-step

  1. Convert the annual rate to a periodic rate by dividing by the compounding frequency (monthly = 12, quarterly = 4, annually = 1)
  2. Start with the initial deposit as the running balance
  3. For each period, multiply the balance by (1 + periodic rate) so the existing balance earns its compound return
  4. Add the contributions made during that period (monthly contribution × months per period)
  5. Repeat for every period across the investment horizon to build a year-by-year schedule
  6. Track cumulative contributions and cumulative interest separately so the schedule shows what came from saving vs what came from compounding
Rounding mode
ROUND_HALF_UP
Precision
20-digit internal precision (Decimal.js), rounded to 2 decimal places for display
Logic last reviewed

Assumptions & limitations

What this calculator assumes

  • Monthly contributions are made at the end of each month
  • Interest is reinvested at the selected compounding frequency
  • The annual rate is held constant across the full investment horizon
  • Taxes, inflation, and transaction costs are not modelled
  • Returns are smooth — no sequence-of-returns risk or volatility

What this calculator doesn’t account for

  • Does not model investment fees, brokerage costs, or fund management fees (use the fee drag calculator for that)
  • Does not adjust for inflation — balances are nominal, not real
  • Does not factor in tax on returns or contributions
  • Assumes a constant rate of return — actual markets are volatile and the order of returns matters
  • Does not account for currency risk on foreign-asset investments

Worked example

A 30-year-old invests an initial $10,000 and contributes $500 a month for 30 years at an assumed 7% annual return, compounded monthly.

Input Value
Initial deposit $10,000
Monthly contribution $500
Annual rate 7%
Compounding Monthly
Investment horizon 30 years

End balance: ~$687,000 — Total contributed: $190,000 — Interest earned: ~$497,000

Over 30 years the investor contributes $190,000 ($10,000 + 30 × 12 × $500). The remaining ~$497,000 of the final balance is compound returns — more than 2.5× the contributed amount. The first 10 years contribute most of the contributions but only a fraction of the final balance; the last 10 years add most of the growth because the balance compounds on itself.

Frequently asked questions

What is compound interest?

Compound interest is interest earned on both your original principal and on the interest that has already accrued. Unlike simple interest (which only ever earns on the principal), compound interest accelerates over time because each period's earnings get added to the base that earns the next period's interest.

How does compounding frequency affect returns?

More frequent compounding produces marginally higher returns at the same headline rate. Monthly compounding at 7% effectively earns about 7.23% annually; daily compounding earns 7.25%. The differences are small at typical rates but grow at higher rates and longer horizons. The bigger driver of total returns is the rate itself, not the compounding frequency.

What is the rule of 72?

A mental shortcut: divide 72 by your annual rate of return to get a rough estimate of how many years it takes for an investment to double. At 6%, money doubles in ~12 years; at 8%, in ~9 years; at 12%, in ~6 years. It's not exact, but it's accurate enough for back-of-envelope planning at typical rates.

Simple vs compound interest?

Simple interest pays a fixed amount per period based only on the original principal — $100 at 5% earns $5 every year, forever. Compound interest pays on the growing balance — $100 at 5% earns $5 in year one, then $5.25 in year two on $105, then $5.51 in year three, and so on. Almost all real-world investments compound.

How does inflation affect compound growth?

Inflation erodes the purchasing power of nominal returns. A 7% nominal return in a 3% inflation environment is a 4% real return — that's the rate at which your purchasing power actually grows. This calculator shows nominal balances. To estimate real growth, subtract your assumed inflation rate from the return rate before running the projection.

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