Compound interest
Put in a starting amount, what you add each month, a yearly rate and a number of years. See how the sum grows, year by year.
- After 20 years
- 0
- You put in
- 0
- Growth
- 0
For information only. Not financial advice. This shows arithmetic only; real returns vary and can be negative.
Year by yearShow the tableHide the table
| Year | Put in so far | Growth so far | Balance |
|---|
Monthly: each month, the balance grows by the yearly rate divided by 12, and then that month’s addition goes in.
Yearly: once a year, the balance from the start of that year grows by the yearly rate. Money added during the year goes in at the end of each month and only starts to grow the next year.
Compound interest calculator: what it is and how to use it
Compound interest is interest paid on the starting amount and on the interest already added, so each year's growth is worked out on a bigger sum. This calculator shows a balance year by year from a starting amount, a monthly addition, a yearly rate and a number of years. It is free and runs in your browser; it is arithmetic for information only, not financial advice.
What compound interest means
For information only. Not financial advice. The US Securities and Exchange Commission's Investor.gov defines compound interest as "interest paid on principal and on accumulated interest". Once interest is added, it earns interest too.
How often that happens is the compounding frequency, which Investor.gov's own calculator describes as the "times per year that interest will be compounded". This calculator offers monthly or yearly. For the starting amount alone, the arithmetic is: starting amount × (1 + rate ÷ n) to the power of (n × years), where n is 12 for monthly and 1 for yearly.
Time does a lot of the work. In The Psychology of Money, Morgan Housel's chapter on compounding argues that Warren Buffett's fortune owes as much to how long he has invested as to how well. More in our summary of the book.
The figures here leave out fees, taxes and rising prices, and keep the rate the same every year. Real returns do not behave like that and can be negative. For decisions about your own money, talk to a qualified adviser.
How to use it
- Enter a starting amount and what you add each month; use 0 if you add nothing.
- Enter a yearly rate in percent and a number of years, from 1 to 60.
- Choose whether interest is added monthly or yearly, and type a currency sign if you want one shown.
- Read the three figures: the balance at the end, how much of it you put in, and the growth. The bar chart and the year-by-year table show how it builds.
- Change one number at a time, such as the years, to see how much each input moves the result.
An example
Open the page and the boxes already hold 1,000 to start, 100 a month, 5% a year and 20 years, added monthly. Change only the years to 10, note the growth figure, then set it back to 20 and compare. Then switch between monthly and yearly with everything else the same. The numbers are arithmetic, not a forecast for any real account.
Questions people ask
What is compound interest?
Interest paid on the starting amount and on interest already added. Investor.gov puts it as "interest paid on principal and on accumulated interest".
What is the formula for compound interest?
For one starting amount: amount × (1 + r ÷ n) to the power of (n × t), where r is the yearly rate as a decimal, n is how many times a year interest is added and t is the number of years.
What is the difference between monthly and yearly compounding?
Monthly adds interest twelve times a year at a twelfth of the yearly rate each time, so with the same positive rate the balance ends a little higher than with yearly. The calculator lets you switch between the two.
Is this financial advice?
No. It is arithmetic for information only, with no fees, taxes or price rises and a rate that never changes. For your own situation, speak to a qualified adviser.
Read more
- The Psychology of Money summary: the key ideas and what holds up
- 18 assets that can earn over time, and what each one involves
- Decision matrix (free tool)
Sources
For information only. Not financial advice. The calculator runs in your browser: nothing you type is saved or sent to us.
Related reading: The Psychology of Money summary · All free tools