How to use the compound interest calculator
- Enter your initial deposit — the amount you start with (it can be zero).
- Enter how much you plan to add each month as a monthly contribution.
- Enter the expected annual interest rate or return, the number of years, and how often interest is compounded.
- See the future value, the total you put in, the interest earned and a year-by-year table and chart.
What is compound interest?
With simple interest, you earn interest only on the money you deposited. With compound interest, the interest you earn is added to your balance, and the next period’s interest is calculated on the larger amount. You earn “interest on interest”, so growth speeds up over time.
For example, 100,000 at 8% simple interest earns 8,000 every year — 80,000 in ten years. At 8% compounded yearly it earns 8,000 in year one, 8,640 in year two, and so on, reaching about 115,892 of interest in ten years.
The compound interest formula
For a single deposit:
A = P × (1 + r/n)^(n × t)
where P is the starting amount, r the annual rate as a decimal, n the number of times interest is compounded per year and t the number of years.
With regular monthly contributions, the calculator simulates every month: it adds your contribution at the end of each month and applies the interest rate for the chosen compounding frequency. This matches how most savings accounts, deposit pension schemes (DPS) and systematic investment plans (SIPs) behave.
The rule of 72
A quick way to estimate how long it takes money to double: divide 72 by the annual interest rate. At 8%, money doubles in about 72 ÷ 8 = 9 years. At 12%, about 6 years. At 4%, about 18 years.
Why starting early matters
Time is the most powerful part of the formula. Saving 5,000 a month at 8% for 30 years produces far more than twice the result of saving the same amount for 15 years, because the early deposits have much longer to compound. Try changing the years in the calculator to see the effect.
Does compounding frequency matter?
More frequent compounding gives slightly more interest, but the difference is small compared with the rate and the time period. At 8% per year, monthly compounding is equivalent to an effective annual rate of about 8.30%, and daily compounding about 8.33%.
Keep expectations realistic
- Bank deposits and savings certificates offer a fixed, known rate. Investments such as shares and mutual funds do not; their returns vary from year to year and can be negative.
- Inflation reduces what your future money can buy. To see growth in today’s money, subtract the expected inflation rate from the interest rate before calculating.
- Taxes and fees on interest or investment gains also reduce the final amount.
Frequently asked questions
How is compound interest calculated with monthly deposits?
The calculator works month by month: it adds interest for the month (based on your compounding frequency) and then adds your monthly contribution. The balance at the end of each year is shown in the table.
What is the difference between simple and compound interest?
Simple interest is paid only on the original deposit. Compound interest is paid on the deposit plus all interest already earned, so it grows faster over time.
What interest rate should I use?
Use the rate offered by your bank or savings scheme for fixed deposits. For investments, use a conservative long-term average and remember actual returns vary.
Does this include inflation or tax?
No. Results are before inflation, tax and fees. Subtract the expected inflation rate from the interest rate to estimate growth in today’s money.