Compound Interest Calculator
The most important chart in personal finance: what happens when your money earns money. Add monthly contributions to see the effect of consistent investing.
How compound interest works
Simple interest pays you only on your original deposit. Compound interest pays you on your deposit plus all interest already earned — growth on growth. The formula for a lump sum is A = P(1 + r/n)nt, where n is how many times per year interest compounds. Monthly contributions are added at the end of each month and start compounding immediately.
Why starting early beats saving more
At 7% annual growth, money doubles roughly every 10 years (the "Rule of 72": 72 ÷ rate ≈ years to double). Someone who invests $250/month from age 25 to 35 and then stops typically ends up with more at 65 than someone who invests $250/month from 35 to 65 — the first decade of compounding does the heavy lifting.
What rate should you assume?
High-interest savings accounts: whatever your bank currently pays. Diversified stock index funds: 6–8% per year is a common long-run planning assumption before inflation, but returns vary hugely year to year. Being conservative in a plan beats being disappointed in retirement.
What time does to $300 a month
Same contribution, same 7% annual return. The only thing that changes is how long it runs:
| Years | You contributed | Growth | Final balance |
|---|---|---|---|
| 10 | $36,000 | $15,925 | $51,925 |
| 20 | $72,000 | $84,278 | $156,278 |
| 30 | $108,000 | $257,991 | $365,991 |
| 40 | $144,000 | $643,444 | $787,444 |
Read the growth column rather than the balance. Over 10 years, growth is less than half of what you put in. By 40 years it is four and a half times your contributions. Doubling the time from 20 to 40 years doesn't double the result — it multiplies it by five.
That's the entire argument for starting early, and it's why the last decade before retirement produces the largest absolute gains: the balance compounding is at its biggest, even though you're contributing no more than before.
The Rule of 72
Divide 72 by your annual return to estimate the years until money doubles. At 7%, roughly 72 ÷ 7 ≈ 10.3 years. It also works in reverse for inflation: at 3%, prices double in about 24 years — which is why cash under a mattress loses half its purchasing power in a generation.
Where fees quietly eat the result
A fund charging 2% a year turns a 7% gross return into 5% net. Over 30 years on $300 a month, that difference costs well over $100,000 of final balance — money that goes to the fund manager rather than to you. Reduce the "annual return" in the calculator by your fund's expense ratio to see your own realistic number. This is why low-cost index funds have become the default recommendation for long-horizon investors.