4C Tool Hub

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.

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Interest earned
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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.

Frequently asked questions

Does compounding frequency really matter?
Less than people think. $10,000 at 7% for 20 years yields about $38,697 compounded annually versus $40,387 compounded monthly — a real but modest difference. The rate and time horizon matter far more.
Is interest from savings taxable?
Usually yes, unless held in a tax-sheltered account (TFSA/RRSP in Canada, ISA in the UK, 401(k)/IRA in the US). Tax-sheltered compounding is dramatically more powerful because nothing is skimmed off each year.
What about inflation?
This calculator shows nominal growth. To think in today's dollars, subtract expected inflation from your return — e.g., use 4–5% instead of 7% if you assume 2–3% inflation.
Are contributions added at the start or end of each month?
End of month, which is the conservative convention. Contributing at the start of each month yields slightly more.

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