What compound interest means
With simple interest you only earn interest on the money you put in. With compound interest the interest is added to your balance and earns interest itself in the next period. Over a few years the difference is small, but over decades it becomes the main driver of growth. That is why the same monthly saving habit started ten years earlier can end with a much larger pot.
How often interest is added matters too. Savings accounts in the US and UK typically compound daily or monthly and advertise an APY or AER (the effective annual rate after compounding). Some bonds and fixed-term deposits pay interest once a year. In the calculator you can choose monthly or annual compounding; with annual compounding we convert the yearly rate into an equivalent monthly rate so monthly deposits are treated fairly.
The formula
For a starting balance P, a monthly deposit D, a monthly rate i and n months:
final balance = P × (1 + i)ⁿ + D × ((1 + i)ⁿ − 1) ÷ i
With monthly compounding i is the annual rate divided by 12. With annual compounding i = (1 + annual rate)^(1/12) − 1. Deposits are assumed at the end of each month.
Example: you start with $5,000, add $200 a month and earn 4% compounded monthly for 10 years. Your own deposits total $5,000 + 120 × $200 = $29,000. The final balance is about $36,900, so roughly $7,900 is interest. Without the monthly deposits the $5,000 alone would grow to about $7,450.
The rule of 72
A quick way to estimate growth without a calculator: divide 72 by the interest rate to get the approximate number of years it takes to double your money. At 6% that is about 12 years, at 4% about 18 years and at 9% about 8 years. The rule works best for rates between roughly 2% and 12%.
How time and rate change the outcome
| Monthly deposit | Rate | 10 years | 20 years | 30 years |
|---|---|---|---|---|
| $100 | 3% | $13,970 | $32,830 | $58,270 |
| $100 | 5% | $15,530 | $41,100 | $83,220 |
| $100 | 7% | $17,310 | $52,090 | $121,990 |
Monthly compounding, no starting balance, rounded to the nearest $10.
The table shows two things. Doubling the time more than doubles the result, and a couple of percentage points make a large difference over 30 years. Small fees work the same way in reverse: a 1% annual fee on an investment fund compounds against you.
Things the calculator does not include
- Taxes. Interest and investment returns may be taxed, which lowers the effective growth rate. Tax-advantaged accounts such as ISAs in the UK or 401(k)s and IRAs in the US change the picture.
- Inflation. A balance of $36,900 in ten years buys less than $36,900 today. Use the inflation calculator to translate future amounts into today’s money.
- Variable rates. Savings rates change over time and investment returns fluctuate year to year. Treat the result as a scenario, not a promise.
Tips
- Start early. Time is the strongest lever in the formula. Even small amounts benefit from extra years.
- Compare APY, not headline rates. Two accounts with the same nominal rate can differ if one compounds monthly and the other annually.
- Have a target in mind? The savings calculator can also work backwards and tells you how much to save each month.
- Worried about rising prices? The inflation calculator shows what your future balance is worth in today’s money.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount. Compound interest is also paid on interest you have already earned, so the balance grows faster each year.
Does monthly compounding make a big difference?
At normal savings rates the difference is modest. $10,000 at 5% grows to $16,289 in 10 years with annual compounding and to $16,470 with monthly compounding.
What is APY or AER?
APY (annual percentage yield, US) and AER (annual equivalent rate, UK) express the yearly return including the effect of compounding. They make accounts with different compounding frequencies comparable.
Can I use this for investments?
Yes, as a projection. Enter an expected average annual return instead of an interest rate. Remember that investment returns vary from year to year and are not guaranteed.
How long does it take to double my money?
Divide 72 by the annual rate. At 4% it takes about 18 years, at 8% about 9 years.
Are deposits made at the start or end of each month?
The calculator assumes deposits at the end of each month, which is the most common convention and slightly conservative.
Last reviewed: 2026-10-06. Results are estimates for information only.