In Short
Compound interest is interest earned on your deposits and on the interest already added. $10,000 plus $500 a month at 7% for 20 years, compounded monthly, grows to about $300,851: $130,000 of your money and $170,851 of growth. The Rule of 72 gives a quick check: at 7%, money doubles in about 10 years [2].
How to Use the Compound Interest Calculator
- Enter your starting amount and what you plan to add each month.
- Set the yearly rate you expect and how many years the money stays invested.
- Pick how often interest compounds, and optionally raise your contribution each year.
- Or tap Say It All: “I have 25,000 to start and add 400 a month at 8 percent for 30 years.”
The Formula
Each month, the balance earns one month of interest and then your contribution is added. The monthly rate comes from the yearly rate and how often it compounds, so daily compounding earns slightly more than yearly at the same rate [1].
- Monthly rate = (1 + annual rate ÷ n)^(n ÷ 12) − 1, where n = compounds per year
- New balance = old balance × (1 + monthly rate) + monthly contribution
- Lump sum only: future value = start × (1 + annual rate ÷ n)^(n × years)
- Rule of 72: years to double ≈ 72 ÷ interest rate (in percent)
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| Steady saver | $10,000 start, $500/month, 7%, 20 years, monthly | $300,851 balance · $130,000 deposited · $170,851 growth |
| Starting from zero | $0 start, $200/month, 6%, 30 years, monthly | $200,903 balance · $72,000 deposited |
| Lump sum, left alone | $25,000 start, no contributions, 8%, 30 years, yearly | $251,566 (about 10× the deposit) |
| Rising contributions | $300/month rising 3% a year, 7%, 25 years | $319,262 balance · $131,253 deposited |
| High-yield savings | $5,000 start, 4.5%, 10 years, daily | $7,841 |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
How Does Compound Interest Work?
Simple interest is paid only on the money you put in. Compound interest is also paid on the interest you've already earned, so the growth itself starts to grow [1]. In the early years most of the balance is your own deposits. Over long periods, growth usually overtakes them: in the $10,000 + $500 a month example, growth passes total deposits in year 17.
Time does more of the work than the rate. Starting ten years earlier at the same contribution often adds more than a higher rate would.
What Is the Rule of 72?
Divide 72 by the yearly interest rate to estimate how many years it takes money to double [2]. At 6%, about 12 years; at 9%, about 8 years. It's a shortcut: the calculator shows the exact figure next to it.
The same rule works in reverse for costs. At 3% inflation, prices double in about 24 years.
Does Compounding Frequency Matter?
A little. $10,000 at 5% for 10 years grows to $16,289 compounded yearly and $16,487 compounded daily. Banks show the effect as the annual percentage yield (APY), which already includes compounding, so compare savings accounts by APY [3].
Frequently Asked Questions
How much will $10,000 grow in 20 years?
At 7% compounded monthly with no more deposits, $10,000 grows to about $40,387 in 20 years. Adding $500 a month brings it to about $300,851.
How long does it take to double money at 8%?
About 9 years by the Rule of 72 (72 ÷ 8). With yearly compounding the exact answer is 9.0 years [2].
What's the difference between APR and APY?
APR is the yearly rate before compounding. APY includes compounding, so it shows what you actually earn in a year. A 5% APR compounded daily is about a 5.13% APY [3].
Is the return in this calculator guaranteed?
No. Savings accounts and CDs pay a stated rate, but investment returns rise and fall. The calculator assumes the same rate every year, before taxes, fees and inflation.
How much do I need to save each month to reach $1 million?
At 7% compounded monthly, about $820 a month for 30 years or about $1,920 a month for 20 years, starting from zero. Try your own numbers above.
Sources
- Compound Interest Calculator — U.S. Securities and Exchange Commission (Investor.gov)
- What is compound interest? (Rule of 72) — U.S. Securities and Exchange Commission (Investor.gov)
- Regulation DD (Truth in Savings), § 1030.2 Definitions: annual percentage yield — Consumer Financial Protection Bureau
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.