FinanceCalcCompound Interest Calculator
See what a starting balance plus a monthly contribution actually becomes — with your choice of compounding frequency, the tax drag on the interest, and what the result is worth in today's money. Everything recalculates as you type.
How this is calculated
Growth is applied period by period, so contributions and timing compound exactly the way a bank would credit them:
- Periodic rate — the annual rate divided by the compounding frequency (7% monthly = 0.5833% per period).
- Contribution timing — a deposit at the start of a period earns that period's interest; at the end, it does not.
- Effective annual rate (APY) — reported separately, because a 7% nominal rate compounded daily is really 7.25% a year.
- Tax drag — applied to the interest only, at the rate you enter. Principal and contributions are not taxed.
- Real value — the after-tax balance discounted by your inflation assumption, which is the number that tells you what the money will buy.
Interest is credited at full precision internally and rounded for display. A bank that rounds each period to the cent will land a few dollars away from this figure over decades — a difference in rounding, not in maths.
What compound interest actually does
Simple interest pays you on your original deposit forever. Compound interest pays you on the deposit and on everything it has already earned. For the first few years the two look almost identical, which is exactly why so many people under-rate compounding — the payoff is back-loaded, and it only becomes obvious once the interest starts to dwarf the deposits.
The figure worth watching is not the headline balance but the share of that balance that came from interest rather than from you. Below, the calculator tracks that crossover year by year, and the chart marks where interest overtakes your own contributions.
Rate and time beat almost everything else
Two levers dominate: the rate you earn and the number of years you stay invested. Compounding frequency — annual versus daily — is a distant third. At 7%, moving from annual to daily compounding raises the effective annual rate from 7.00% to about 7.25%: real, but small next to the difference between saving for 20 years and saving for 30.
The same maths works against you
Compounding is symmetric. A credit card at 24% APR compounds in the issuer's favour, which is why the minimum payment can leave a balance barely moving. If you are carrying a balance, run the credit card payoff calculator before you optimise your savings rate — paying down 24% debt beats earning 7% every time.
Inflation is the part most calculators hide
A nominal balance is not purchasing power. Add an inflation assumption and the tool reports what the money is worth in today's terms. At 3% inflation a balance roughly one-third smaller than it looks after 30 years, and that is before tax.
Frequently asked questions
What is a realistic rate of return to enter?
For a long-term, diversified stock portfolio, 6–8% nominal is the range most planners use, with 7% a common middle. For a high-yield savings account, enter the account's actual APY. Entering the rate as an APY is the simplest approach; if you enter a nominal rate, set the compounding frequency to match.
Should I use this or a retirement calculator?
This tool models a single savings pot. A retirement plan has to answer a different question — whether the pot is big enough to live on — which means modelling withdrawals, Social Security and inflation together. Start here to see what your savings rate produces, then check the Social Security claiming calculator for the income side.
Why is the daily-compounding figure barely higher?
Because compounding frequency has diminishing returns. Annual to monthly is a meaningful jump; monthly to daily is worth roughly 0.01 percentage points at 7%. Anyone selling daily compounding as a decisive advantage is overstating it.
Does this account for fees?
Not directly. To model a fund fee, subtract it from the rate — a 7% gross return with a 0.5% expense ratio is entered as 6.5%. Fees compound against you with the same force that returns compound for you, which is why they matter more than they look.