Calculate how your money grows with compound interest. Enter your starting amount, monthly contributions, interest rate, and time period to see detailed projections.
How Compound Interest Builds Wealth Over Time
Compound interest is often called the eighth wonder of the world. Unlike a flat return, compounding means your earnings generate their own earnings. Each year, the base on which interest is calculated grows — not just from what you put in, but from the returns you've already accumulated.
Consider someone who starts with $10,000 and contributes $500 per month at a 7% annual return. After 10 years, they'll have roughly $106,000. Only $70,000 came from their own pocket. The remaining $36,000 was generated entirely by compound growth.
Why Compounding Frequency Matters
Monthly compounding applies interest 12 times per year, meaning each month's gains are included in the next month's calculation. Over long time horizons, the difference between monthly and yearly compounding can add up to thousands of dollars.
Quick Answer
Starting with $10,000 and adding $500 per month at a 7% annual return compounded monthly, you reach $106,639 after 10 years. Of that, $70,000 is money you deposited and $36,639 is compound interest. The nominal 7% rate equals an effective annual rate of 7.23% because interest is added 12 times a year.
Worked Example
Compound interest on $10,000 plus $500 per month at 7%, compounded monthly
A is the final balance, P the starting amount, PMT the recurring deposit, r the nominal annual rate as a decimal, n the compounding periods per year and t the number of years.
Key Terms Defined
Compound interest
Interest calculated on the original principal plus all interest already added to the balance, so each period's earnings become part of the base for the next period.
Nominal rate (APR)
The stated annual rate before compounding is applied. A 7% nominal rate compounded monthly charges or pays 7%/12 = 0.5833% each month.
Effective annual rate (APY)
The rate you actually earn or pay once compounding is included: EAR = (1 + r/n)^n − 1. A nominal 7% compounded monthly equals an effective 7.23% per year; compounded daily it equals 7.25%.
Compounding frequency (n)
How many times per year interest is added to the balance. Monthly is n = 12, quarterly n = 4, annually n = 1, daily n = 365. Higher n raises the effective rate but with rapidly diminishing returns.
Method & Limitations
All figures on this page are generated by the same calculation engine that powers the calculator above — the worked example is not a static illustration.
Contributions are treated as deposits made at the end of each compounding period.
Interest is compounded on the full balance, including interest already earned.
Balances are rounded to the nearest cent internally and displayed to the nearest dollar.
The return rate is assumed constant for the whole period; real markets and savings rates vary year to year.
Fees, account charges and currency effects are excluded unless a field for them exists in the calculator.
Results are estimates for planning purposes, not financial advice.