About this calculator
Compound interest is what makes early investing powerful: growth generates its own growth, so the last years of a long horizon contribute far more than the first. The same logic works against you on debt, which is why paying off high-interest balances early matters so much.
How it works
The projection compounds monthly at your assumed rate and adds your contribution at the end of each month. Because each contribution earns interest for a different length of time, the growth accelerates over time rather than staying linear.
Frequently asked questions
What is the compound interest formula?
For lump-sum growth, A = P(1 + r/n)^(nt), where P is the principal, r the annual rate, n the number of compounding periods per year, and t the number of years. With regular contributions, each payment is treated as its own principal growing for the remaining time.
What is the Rule of 72?
Divide 72 by your annual return to estimate the years to double. At 8% it gives 9 years, at 10% it gives 7.2 years, at 6% it gives 12. It is an approximation that works well for moderate rates.
What is a realistic compound return?
Historically, US stocks have averaged about 10% annually before inflation, bonds around 4 to 5%, and high-yield savings around 4%. A blended portfolio often lands near 7 to 8%, which is what most planners use for planning.
How often should interest compound?
Compounding more often slightly increases growth, but the difference is small at typical rates. Between monthly and daily compounding on 10,000 dollars at 7% over 20 years, the gap is only a few dollars.
Does compound interest work on savings accounts?
Yes, but the effect is small at typical savings rates. APY matters more than compounding frequency there. The power of compounding really shows with market investments held over decades.
What is the difference between APY and interest rate?
APY already includes compounding, so it is the honest number to compare across accounts. An interest rate must be compounded to match it. A 5.0% rate compounded daily yields about 5.12% APY.