How to Use
Enter the principal — the starting amount you are investing or saving.
Enter the annual interest rate as a percentage (e.g. 5 for 5%).
Enter the time period in years (decimals accepted, e.g. 2.5).
Select how often interest is compounded each year.
Optionally enter a regular contribution added each compounding period.
Results update automatically — see the final balance, interest breakdown, and growth chart.
How Compound Interest Works
The core formula is A = P x (1 + r/n)^(n x t), where P is the principal, r is the annual rate as a decimal, n is the number of compounding periods per year, and t is the time in years. When regular contributions are added each period the formula becomes A = P x (1 + r/n)^(n x t) + PMT x [((1 + r/n)^(n x t) minus 1) / (r/n)]. Interest compounds on itself, so the longer the time horizon the larger the proportional gain — a pattern commonly called the snowball effect.
Step-by-Step Example
- Inputs: Principal = 5,000 | Rate = 6% | Time = 10 years | Compounding = Monthly | Contribution = 100/month
- Monthly rate = 6% / 12 = 0.5% = 0.005 | Total periods = 120
- Principal growth: 5,000 x (1.005)^120 = 9,096.98
- Contribution growth: 100 x ((1.005)^120 minus 1) / 0.005 = 16,387.93
- Final balance: 9,096.98 + 16,387.93 = 25,484.91
- Total invested: 5,000 + 100 x 120 = 17,000 | Total interest: 25,484.91 minus 17,000 = 8,484.91
- Effective annual rate: (1.005)^12 minus 1 = 6.1678%
When to Use This Calculator
- Estimating growth of a savings account or fixed deposit over time
- Projecting the future value of recurring investments like monthly transfers
- Comparing offers with different compounding frequencies using the effective annual rate
- Checking how long it takes to reach a financial goal at a given rate
- Teaching or learning the mechanics of compound interest and time value of money
Important Note
Results are mathematical estimates based on a constant interest rate and fixed compounding frequency. Real accounts may apply variable rates, fees, taxes, or different compounding rules. This tool is for educational and planning purposes only, not financial advice.
Simple Interest vs Compound Interest
Key Features
Optional Regular Contributions
Model recurring deposits added every compounding period, ideal for savings plans and investment accounts.
Effective Annual Rate
See the true yearly return after compounding, so you can compare accounts with different compounding frequencies fairly.
Annual Growth Breakdown
A detailed table and line chart show exactly how your balance and interest grow over time.
PDF Export
Download a clean one-page PDF report with your results and the full annual breakdown table.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Over time this causes exponential rather than linear growth.
What does compounding frequency mean?
Compounding frequency is how many times per year interest is calculated and added to the balance. More frequent compounding (e.g. daily vs annually) produces a slightly higher effective return.
How does the regular contribution work?
The contribution is added once per compounding period. If you compound monthly and enter 100, an extra 100 is deposited each month before interest is applied.
What is the effective annual rate (EAR)?
The EAR converts any compounding frequency to an equivalent annual rate, letting you compare offers that compound at different intervals on equal footing.
Can I enter fractional years?
Yes. Enter any positive number for the time period, including decimals such as 0.5 for six months or 2.25 for two years and three months.