Compound Interest Calculator
See how a lump sum or regular monthly contributions grow over time with compound interest.
The Power of Compound Interest
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods — often called "interest on interest." Over long time horizons, this compounding effect can dramatically grow savings and investments, which is why starting to invest early is one of the most repeated pieces of financial advice.
This calculator lets you model a one-time investment, ongoing monthly contributions, or both, at any compounding frequency, so you can compare scenarios such as a high-yield savings account versus an index fund with a higher expected return.
Frequently Asked Questions
What's the difference between APR and APY?
APR (annual percentage rate) is the stated nominal rate, while APY (annual percentage yield) reflects the actual return after accounting for compounding. This calculator's "annual interest rate" field behaves like an APR combined with your chosen compounding frequency.
How does compounding frequency affect my returns?
More frequent compounding (daily vs. monthly vs. annually) slightly increases your final balance for the same stated rate, though the effect is usually smaller than the impact of the rate itself or your time horizon.
Is a higher expected return always realistic?
No — higher expected returns generally come with higher risk and more volatility. Use a conservative estimate for guaranteed products like savings accounts, and remember that investment returns fluctuate year to year even if the long-term average is positive.
Should I include my monthly contributions in this calculator?
Yes, if you're regularly adding to your savings or investment, entering a monthly contribution gives a much more realistic projection than a lump sum alone, since most people build wealth through consistent contributions over time.