Compound Interest Calculator
See how your money grows over time. Calculate the power of compound interest with regular contributions.
Your Investment
Growth Over Time
Year-by-Year Breakdown
| Year | Contributions | Interest | Balance |
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How Compound Interest Works
Compound interest is the eighth wonder of the world, as Albert Einstein famously said. It's the interest you earn on both your original investment AND on the interest you've already earned. Over time, this creates exponential growth.
The Formula
The standard compound interest formula is:
A = P(1 + r/n)^(nt)Where:
- A = Final amount
- P = Principal (initial investment)
- r = Annual interest rate (decimal)
- n = Compounding frequency per year
- t = Time in years
Example: The Power of Starting Early
If you invest $10,000 at age 25 with an average return of 7% annually and add $500 per month, by age 65 you'll have approximately $1,348,000. Of that, only about $250,000 would be your contributions — the rest is pure compound interest.
Wait until age 35 to start? You'd end up with about $640,000 — less than half. Time is your most valuable asset when investing.
Tips to Maximize Compound Interest
- Start now — Even small amounts grow significantly over decades
- Be consistent — Automatic monthly contributions remove the temptation to skip
- Reinvest dividends — Don't take dividends as cash; reinvest them
- Minimize fees — A 1% fee can cost you hundreds of thousands over a lifetime
- Stay invested — Don't panic-sell during market downturns
Where to Invest for Compound Growth
For long-term compound growth, most financial experts recommend low-cost index funds like S&P 500 ETFs (such as VOO, SPY, or VTI). Historically, the S&P 500 has averaged about 10% annual returns (around 7% after inflation). High-yield savings accounts and CDs offer lower but safer returns, typically 4-5% in 2026.
Frequently Asked Questions
What's a realistic interest rate to use?
For long-term stock market investments, 7-10% is typical (the S&P 500 historical average is about 10% nominal, 7% after inflation). For high-yield savings accounts, use 4-5%. For bonds, 3-5%.
Does this calculator account for inflation?
No. To account for inflation, subtract about 3% from your interest rate. For example, if you expect 10% returns, use 7% to see your real purchasing power.
Are taxes included in this calculation?
No. To get after-tax results, multiply the interest earned by (1 - your tax rate). For tax-advantaged accounts like Roth IRA or 401(k), no additional tax adjustment is needed.
What's the difference between compound and simple interest?
Simple interest only earns interest on your principal. Compound interest earns interest on both your principal AND on previously earned interest. Over decades, the difference is enormous.
How often should interest compound?
More frequent compounding produces slightly better results, but the difference between monthly and daily compounding is tiny. Most investments compound monthly or daily by default.