Skip to content
∑Summatio

Compound Interest Calculator

Calculate compound interest with monthly contributions, inflation, taxes, and expense ratios. Visualize your wealth growth over time.

$
$
%
years

Final Value

$143,973.27

Total Contributions

$58,000.00

Interest Earned

$85,973.27

Starting Capital
$10,000.00
Total Contributions
$58,000.00
Interest Earned
$85,973.27
Final Value
$143,973.27

Related Calculators

What Is Compound Interest?

Compound interest is often called the eighth wonder of the world, and for good reason. Unlike simple interest, which is calculated only on your original deposit, compound interest earns returns on both your principal and all previously accumulated interest. This creates an exponential growth curve that accelerates dramatically over time. The formula FV = PV * (1 + r/n)^(n*t) captures this effect, where PV is your starting amount, r is the annual rate, n is the compounding frequency, and t is the number of years. Even modest returns can produce remarkable results when given enough time to compound.

The Rule of 72

The Rule of 72 is a quick mental shortcut to estimate how long it takes for your money to double at a given rate of return. Simply divide 72 by your expected annual return percentage. At 6% per year, your investment doubles in approximately 12 years. At 8%, it takes about 9 years. At 12%, just 6 years. This rule works well for rates between 4% and 15% and provides a surprisingly accurate approximation without any complex calculations. It also works in reverse: divide 72 by the number of years you are willing to wait, and you get the return rate needed to double your money.

Why Starting Early Matters

Time is the single most powerful factor in compound interest. An investor who starts contributing $200 per month at age 25 will accumulate significantly more wealth by age 65 than someone who starts the same contribution at age 35, even though the difference in total contributions is only $24,000. The extra decade of compounding can result in hundreds of thousands of dollars of additional growth. This is why financial advisors consistently emphasize the importance of starting to invest as early as possible, even if the amounts seem small. The cost of waiting is not just the missed contributions but the lost compounding on those contributions.

Index Funds vs. Savings Accounts

Traditional savings accounts currently offer interest rates between 0.5% and 4%, which often barely keeps pace with inflation. In contrast, broad-market index funds such as those tracking the S&P 500 have delivered average annual returns of approximately 7% to 10% after inflation over the past several decades. While index funds carry market risk and can experience significant short-term volatility, their long-term track record makes them a popular choice for building wealth over periods of 10 years or more. The key advantage of index funds is their low expense ratios, typically between 0.03% and 0.20%, which means more of your returns stay in your pocket compared to actively managed funds that often charge 1% or more.

Frequently Asked Questions

Compound interest is interest earned on both your initial principal and on previously accumulated interest. Unlike simple interest, which is calculated only on the original amount, compound interest grows exponentially over time because each interest payment becomes part of the base for the next calculation.
The basic compound interest formula is FV = PV * (1 + r/n)^(n*t), where FV is the future value, PV is the present value (starting capital), r is the annual interest rate, n is the number of compounding periods per year, and t is the number of years. For regular contributions, an annuity factor is added to account for periodic deposits.
It depends on your starting capital, monthly contributions, and rate of return. For example, investing $200 per month at a 7% average annual return for 30 years would grow to approximately $227,000, of which only $72,000 comes from your own contributions. The remaining $155,000 is compound interest.
Inflation reduces the purchasing power of your money over time. At a 2% annual inflation rate, $100 today will only buy about $55 worth of goods in 30 years. When evaluating long-term investments, always consider the real (inflation-adjusted) return, which is approximately the nominal return minus the inflation rate.
The Total Expense Ratio (TER) is the annual fee charged by investment funds to cover management, administration, and other operating costs. It is expressed as a percentage of the fund's assets. For example, a TER of 0.2% on a $100,000 portfolio means $200 per year in fees. Low-cost index funds typically have TERs between 0.05% and 0.30%.
Statistically, lump-sum investing outperforms dollar-cost averaging about two-thirds of the time because markets tend to go up over time. However, dollar-cost averaging (investing a fixed amount regularly) reduces the risk of investing everything at a market peak and can be psychologically easier. For most people, consistent monthly contributions are the most practical approach.

All calculations are for general informational purposes only. Not financial, tax, or legal advice. No guarantee of accuracy. Use at your own risk. Full disclaimer