Compound Interest Calculator
See the magic of compounding with regular monthly investments.
What this calculator does
Compound interest is 'interest on interest'—earnings generated by your principal add to your balance, creating even more earnings in the next cycle. Albert Einstein reportedly called it the 'eighth wonder of the world'. This calculator handles four variables: initial balance, regular monthly contributions, annual return rate, and time horizon. It outputs the total future value, total contributions, and net interest earned. It's the perfect tool for planning index fund investments, ETFs, or long-term wealth building.
Formula & how it works
Future Value (FV) = P × (1+r)^n + PMT × ((1+r)^n − 1) / r. P is initial principal, PMT is monthly contribution, r is monthly interest rate, and n is total months.
Worked examples
- Initial 1M, monthly deposit 20K, 7% return, 30 years: Future value is approx 30.62M. You deposited 8.2M total, and compounding added 22.42M.
- Starting from zero, saving 5,000 a month at an 8% return for 40 years yields roughly 17.5M. You contributed 2.4M, earning 15.1M in interest—time is your best friend.
Frequently asked questions
- How do I choose an annual return rate estimate?
- Broad market ETFs (like the S&P 500) average 7%-10% historically. Use 5%-6% for conservative portfolios or 9%-10% if you are purely in aggressive equities.
- Why is growth so slow at the beginning but huge at the end?
- Compound interest follows an exponential curve. As your balance grows, the interest earned each year gets exponentially larger. The first decade feels slow, but the final decade accelerates rapidly.