Compound Interest Calculator

Compound interest pays interest on previously earned interest, so growth accelerates over time. In year one, a $10,000 deposit at 7% earns about $700. By year ten the same rate earns over $1,300 in a single year — not because the rate changed, but because each year's interest joined the balance and started earning its own interest. The compounding frequency controls how often earned interest starts earning its own interest — daily beats monthly beats annually, though the difference shrinks at typical rates.

Regular contributions usually matter more than the initial deposit over long horizons. Because each contribution compounds for a different length of time, they're valued with the future-value-of-an-annuity formula and simply added to the lump-sum result. Consider $250 a month for 30 years at 7%: total contributions are $90,000, but the ending balance approaches $300,000 — the market did more than two-thirds of the work. Starting ten years earlier beats saving twice as much for twenty years, which is why time is consistently called the most powerful input in investing.

The rule of 72 gives a quick mental check on any projection: divide 72 by the annual return to estimate doubling time. At 7%, money doubles roughly every 10.3 years; at 4%, every 18 years; at 10%, every 7.2 years. Use it to sanity-check this calculator's output — if the projected balance implies far more doublings than the rule allows, recheck the inputs.

Inflation is the quiet tax on every projection. A 7% nominal return with 3% inflation is roughly a 4% real return, which halves the doubling pace. When planning retirement or education funding, run the numbers twice — once at the expected nominal return and once at return-minus-inflation — so the future balance is expressed in purchasing power you can actually picture spending.

Compounding cuts both ways: debt compounds against you with identical mathematics. A credit-card balance at 24% APR doubles in about three years if left alone, which is why paying high-APR debt early is mathematically equivalent to earning a guaranteed 24% return. As a rule of thumb, extra cash should attack debt costing more than your expected investment return before it funds new contributions.

This projection assumes one steady rate. Markets don't move in straight lines — sequences of good and bad years, especially near withdrawal time, change outcomes even when the average matches. Treat outputs as planning illustrations rather than promises, revisit them yearly, and keep an emergency cash buffer outside any invested balance so volatility never forces a sale at the worst moment.