Compound interest growth calculator for savings and investments
Understand your compound interest growth over time
The compound interest calculator helps you estimate how your savings or investments can grow when interest is added back to the balance over time. By combining an initial investment, recurring contributions, an annual interest rate and a chosen compounding frequency, you can see how your money may accumulate year by year.
How compound interest works
Compound interest is interest that is calculated not only on the initial principal but also on the interest that has already been added to the balance. Instead of earning interest only on your starting amount, you earn interest on a growing base, which can significantly increase your total wealth over a long period.
The classical compound interest formula for a single initial deposit with no recurring contributions is:
\[ A = P \left(1 + \frac{r}{n}\right)^{n t} \]
where \(A\) is the future value, \(P\) is the initial principal, \(r\) is the annual interest rate, \(n\) is the number of compounding periods per year, and \(t\) is the number of years.
Adding recurring contributions
In many real-world scenarios, you contribute additional amounts over time, for example monthly or yearly deposits into a savings plan. For a constant contribution amount \(C\) added every period, the future value of the contributions can be expressed with the annuity formula:
\[ FV_{\text{contrib}} = C \cdot \frac{\left(1 + \frac{r}{n}\right)^{n t} - 1}{\frac{r}{n}} \]
The total future value is then:
\[ A_{\text{total}} = P \left(1 + \frac{r}{n}\right)^{n t} + C \cdot \frac{\left(1 + \frac{r}{n}\right)^{n t} - 1}{\frac{r}{n}} \]
In practice, this calculator performs a month-by-month simulation to accommodate different combinations of compounding frequencies and contribution frequencies.
Choosing compounding and contribution frequencies
You can choose how often interest is compounded and how often you contribute to your investment:
- Compounding frequency – annually, semi-annually, quarterly or monthly.
- Contribution frequency – none, annually, quarterly or monthly.
More frequent compounding generally increases the final balance, because interest is calculated and added to the balance more often. Likewise, more frequent contributions add more money earlier, giving it more time to earn interest.
Understanding the yearly breakdown table
The results table shows a clear yearly projection of your investment:
- Year – the year number within the projection.
- Starting balance – the balance at the beginning of the year.
- Contributions during year – the sum of all deposits during that year.
- Interest earned – the total interest credited during the year.
- Ending balance – the balance at the end of the year.
When the annual interest is negative (for example, due to a negative rate), the corresponding row is visually highlighted so you can quickly identify years where your capital shrinks instead of grows.
Summary metrics for quick analysis
Above the table, the calculator displays several key summary values:
- Final balance – the projected value of your investment at the end of the selected period.
- Total contributions – the sum of all deposits you have made, including the initial investment and recurring contributions.
- Total interest earned – the total amount of interest credited over the entire period.
- Overall growth (%) – the percentage change between the final balance and the total amount you contributed.
The overall growth percentage is computed as:
\[ \text{Growth} \% = \frac{A - (P + C_{\text{total}})}{P + C_{\text{total}}} \times 100 \]
where \(A\) is the final balance, \(P\) is the initial investment and \(C_{\text{total}}\) is the sum of all recurring contributions.
Practical uses of the compound interest calculator
You can use this compound interest calculator to explore a wide range of scenarios:
- Retirement savings – estimate how much your monthly contributions may grow over decades.
- Education funds – plan long-term savings for tuition or other education expenses.
- General investment planning – compare different interest rates and contribution patterns to choose a suitable strategy.
- Short-term targets – see how quickly you can reach a financial goal by adjusting contributions and time horizon.
By adjusting the inputs and recalculating, you can quickly test how small changes in rate, time or contribution amount can significantly influence your final results due to the power of compounding.
Limitations and good practices
This calculator assumes a constant interest rate and fixed contribution amounts, which may not always match real market conditions. It does not model fees, taxes or inflation. For long-term financial planning, consider combining these projections with assumptions about inflation using formulas such as:
\[ r_{\text{real}} \approx \frac{1 + r_{\text{nominal}}}{1 + i} - 1 \]
where \(r_{\text{real}}\) is the real interest rate, \(r_{\text{nominal}}\) is the nominal interest rate and \(i\) is the inflation rate.
Use the results as an educational tool and a starting point for more detailed financial analysis or professional advice.