How to calculate compound interest
- Enter your starting deposit.
- Add a monthly contribution (0 is fine).
- Set the expected yearly return and the number of years.
- Pick how often it compounds. Monthly is the usual choice.
Interest on your interest
Compound interest is earning interest on your interest. It doesn't look like much in year one. Then you look at year twenty.
Put in a starting amount, what you'll add each month, an expected annual return and how many years. You'll see the final balance, how much of it you actually put in, and how much came from growth. There's a year-by-year table if you want the details.
Frequently asked questions
What return should I assume?
For a savings account, use its actual rate. Long-term stock market averages are often quoted around 7% after inflation, but real returns jump around a lot from year to year. It's smart to try a cautious number as well.
Does compounding frequency matter much?
Less than you'd think. Monthly vs daily makes a small difference. How much you put in and how long you leave it make a much bigger one.
Does this account for inflation or tax?
No, the numbers are before both. Use a lower return rate if you want a rough "real" figure.