How to use the Compound Interest Calculator
- Enter the starting balance and the amount you expect to add at the end of each month.
- Choose an annual return estimate, time horizon, and compounding frequency.
- Compare total money contributed with estimated growth and test conservative and optimistic rate scenarios.
How the calculation works
A = P(1 + r/n)ⁿᵗ + contributions compounded over timeP is the starting principal, r is the annual decimal rate, n is compounding periods per year, and t is years. Monthly contributions are assumed to arrive at the end of each month and grow at the equivalent monthly rate.
Example calculation
Starting with $10,000, adding $250 at each month-end, and earning 7% compounded monthly for 20 years produces an estimated balance around $170,619. About $70,000 is contributed; the remainder is modeled growth.
How to interpret the result
Compounding has more time to work over longer periods, but the projection is highly sensitive to the rate. For investments, real returns vary and may be negative, so use several scenarios rather than one forecast.
Notes and assumptions
- The annual rate remains constant and fees, taxes, and inflation are excluded.
- Monthly contributions occur at the end of each month.
- A smooth rate is a mathematical model, not a prediction of market performance.
- Results are estimates and do not constitute investment advice.
Compound Interest Calculator questions
What is compound interest?
It is growth earned on both the original principal and prior accumulated growth.
Do monthly contributions earn a full year's return?
No. Each contribution begins compounding only after it is added, which the calculator models by month.
Why should I test more than one rate?
Future returns are uncertain. Comparing several rates shows how sensitive the projection is to that assumption.