Compound interest is interest earned on both your deposits and the interest already added to them. Investor.gov, the SEC's investor-education site, describes it as the way money can "snowball" over time. With $10,000 to start, $200 a month and a 7% annual rate compounded monthly, you would have about $144,573 after 20 years: $58,000 of your own deposits and about $86,573 of interest.
This calculator shows the future value, how much of it is interest, the effective annual yield (APY) for the compounding frequency you choose, and a year-by-year table so you can see the curve steepen in later years.
How to use the compound interest calculator
- Enter your starting balance (it can be 0).
- Enter how much you will add each month. Deposits are assumed at the end of each month.
- Enter an annual rate. For savings accounts use the stated rate; for investments use a conservative assumed return.
- Enter the number of years and choose how often interest compounds.
Formula
P is the starting balance, C the monthly deposit, r the annual rate, k the number of compounding periods per year and t the number of years. i is the equivalent monthly rate, which lets deposits be monthly even when interest compounds quarterly or daily.
Worked example
$10,000 to start, $200 a month, 7% a year compounded monthly, for 20 years.
- Monthly rate: 0.07 ÷ 12 = 0.0058333; 240 months.
- Starting balance: 10,000 × 1.0058333240 = $40,387.39.
- Deposits: 200 × (1.0058333240 − 1) ÷ 0.0058333 = $104,185.33.
- Future value ≈ $144,572.72; deposits $58,000; interest ≈ $86,572.72.
The same $10,000 with no deposits, compounded once a year, grows to 10,000 × 1.0720 = $38,696.84.
Why frequency matters less than time and rate
At 7%, moving from annual to daily compounding lifts the effective yield only from 7.000% to about 7.250%. Adding years or contributions has a much larger effect, because growth is exponential in time. The rule of 72 gives a quick check: at 7%, money doubles in about 72 ÷ 7 ≈ 10.3 years (the exact figure for annual compounding is 10.2 years).
Remember that a nominal balance in 20 years will buy less than the same number of dollars today. Use the inflation calculator to convert it to today's money, the savings goal calculator to work backwards from a target, or the retirement calculator for a full plan.
Caveats and assumptions
- A fixed rate is assumed. Investment returns vary from year to year and can be negative.
- Taxes, fund fees and account charges are not deducted.
- Deposits are made at the end of each month; deposits at the start of the month would earn slightly more.
- The 7% default is a planning assumption, not a forecast.
Frequently asked questions
How much will $10,000 grow in 20 years at 7%?
Compounded annually with no further deposits, about $38,697. Adding $200 a month with monthly compounding gives about $144,573.
What is the compound interest formula?
A = P(1 + r/k)^(k·t), where P is the principal, r the annual rate, k the compounding periods per year and t the years.
What is the difference between APR and APY?
APR is the stated annual rate; APY is the effective yield after compounding. At 7% compounded monthly the APY is about 7.229%.
Does daily compounding make a big difference?
Not much compared with monthly. At 7%, daily compounding gives about 7.250% APY versus 7.229% monthly.
What is the rule of 72?
Divide 72 by the annual rate to estimate how many years it takes money to double. At 6% it is about 12 years.
Sources
- Investor.gov (SEC) — Compound Interest Calculator — official calculator with monthly contributions
- Investor.gov (SEC) — What is compound interest? — definition and explanation
- Investor.gov — Glossary — investment terms
This calculator gives estimates for planning and education only. It is not financial, tax or investment advice. Your lender, card issuer, employer or tax authority uses its own terms, fees and rounding, so confirm figures with them before deciding. See our disclaimer and how we build and check calculators.