Compound Interest Calculator

Compound interest is interest earned on both your original deposit and on the interest already added to it. Because each period's interest joins the balance and earns interest itself, savings grow faster over time, an effect often described as "interest on interest".

This calculator combines a one-time initial deposit with optional regular monthly contributions, so you can see how consistent saving and time work together to build wealth.

The difference between annual, monthly and daily compounding is far smaller than the marketing around it suggests. Frequency changes the effective rate slightly; the term changes the outcome enormously.

• 10,000 at 6% for 10 years, compounded annually: about 17,908.
• The same, compounded monthly: about 18,194, a gain of roughly 285 over a decade.
• The same, compounded daily: about 18,220, a further 26.
• Leaving the annual-compounding version for 15 years instead of 10: about 23,966.

Five extra years is worth roughly twenty times more than switching from annual to daily compounding. When comparing accounts, look at the quoted annual equivalent rate, which already folds frequency in, and then stop thinking about it.

A useful shortcut: divide 72 by the annual percentage rate to get the approximate number of years for money to double. At 4% that is 18 years, at 9% it is 8, at 12% it is 6.

The approximation is good between roughly 4% and 12% and drifts at the extremes, but it is close enough for mental arithmetic and it makes the cost of a lower rate immediately obvious: halving your return does not halve your outcome, it delays every doubling.

An annual charge of 1% sounds like it costs 1% of the result. It costs far more, because the charge is taken every year from a balance that would otherwise have gone on growing, and the growth that money would have earned is lost with it.

• 10,000 left for 30 years at 7%: about 76,123.
• The same with a one-point annual charge, so it grows at 6%: about 57,435, 18,688 less, or 24.5% of the final balance.
• With a two-point charge, growing at 5%: about 43,219, or 43% less.

The rate to enter above is therefore the return after charges, not the headline figure. A fund quoting 7% with a 1% annual charge is a 6% input, and over three decades that single point is worth about a quarter of the outcome.