What is compound interest?
Compound interest is interest calculated on your starting balance and on interest you have already earned in previous periods. Unlike simple interest, which only applies to the original principal, compound interest lets your earnings generate more earnings. When you also make regular deposits—annually, monthly, or both—each contribution can participate in that compounding process, which is why consistent saving over many years is so powerful for retirement accounts, education funds, and general wealth building.
Banks, bonds, mutual funds, and many savings products quote a nominal annual rate but compound at different intervals (daily, monthly, quarterly, or annually). This calculator lets you choose how often interest compounds so you can compare scenarios that match your bank statement, investment prospectus, or a hypothetical plan.
How to use this interest calculator
Start with Initial investment: the lump sum you already have today. Then set Annual contribution and Monthly contribution if you plan to add money on those schedules. Use Contribute at the beginning or end of each period to match how your real account works—some payroll or automatic transfers hit before the statement period’s interest is credited; others arrive after.
Enter your Annual interest rate as a percentage (for example, 5 for 5%). Choose Compounding frequency from annual through daily. Set the investment horizon as Years plus Extra months (0–11) for a precise term (for example, 5 years and 3 months). Optional Tax on interest reduces net interest each step; Annual inflation is used only to estimate the buying power of your ending balance—it does not shrink the nominal balance shown in the main results.
Results, the mix chart, and the bar overview update as inputs change. Use Annual schedule or Monthly schedule for period-by-period detail. Save stores your inputs in this browser; Clear resets the default example. Print opens a printer-friendly layout (navigation and some controls are hidden in print styles).
Compound interest vs simple interest
Simple interest grows in a straight line: each period, interest is computed only on the original principal. Compound interest grows faster over time because the base includes prior interest. For the same principal, rate, and time, compound interest almost always produces a higher ending balance than simple interest; the gap widens with longer horizons and higher rates.
If you are comparing a simple-interest product (some short-term loans or notes) with a compound savings rate, use this tool for the compound side and our simple interest calculator for the other—then compare totals and schedules for your situation.
Understanding growth, rates, and time
Three levers dominate outcomes: how much you contribute, how long money stays invested, and the rate of return you assume. Small increases in years or rate often matter more than switching from annual to monthly compounding at the same nominal APR—but all three are worth testing when you stress-test a plan.
The Ending balance mix chart shows what share of your final balance came from the initial lump sum, from all contributions, and from interest. Early in a plan, principal dominates; later, interest can become a large slice if returns are steady. That visualization helps explain why starting early—even with modest contributions—can matter so much.
Compounding frequency
When interest compounds more often at the same stated annual rate, the effective yield is slightly higher because interest is credited sooner and itself begins to compound. Daily or monthly compounding is common for savings; bonds and CDs may compound on a different schedule. Use the dropdown to mirror your product or to see how sensitive your projection is to frequency alone.
Tax on interest and inflation-adjusted buying power
If part of your interest is taxable (for example, in a non-retirement account), enter an approximate Tax on interest percentage. The simulation applies tax to the interest component each compounding step so net growth reflects that drag. This is a simplified model; real tax rules depend on jurisdiction, account type, and holding period—use a tax professional for definitive planning.
Inflation does not reduce the nominal ending balance in the headline number. Instead, we report Buying power of end balance: an estimate of what your ending balance would be worth in today’s dollars if prices rose at the inflation rate you entered. It helps compare long-run goals (“million dollars in 30 years”) with what that might actually buy.
Compound interest formula (concept)
For a single deposit with no extra contributions, a common form is A = P(1 + r/n)nt, where P is principal, r is the annual rate as a decimal, n is compounding periods per year, and t is time in years. With ongoing deposits and beginning vs end timing, closed-form formulas become cumbersome; this page uses a month-by-month simulation so deposits, compounding steps, tax on interest, and your chosen timing line up with the schedules you see in the tables.
Schedules, charts, and printing
The Annual schedule tab rolls monthly detail into calendar years: total deposits, interest, and year-end balance. The Monthly schedule tab lists every month in the horizon—useful for reconciling with spreadsheets or understanding volatility in early periods. Long monthly lists scroll inside the schedule panel for readability.
The year bars above the tables give a quick visual of how ending balance grows across years. Use your browser’s print dialog after clicking Print on the page for a cleaner hard copy or PDF; non-essential UI is suppressed where possible.
Related tools and next steps
For loan payments and amortization, try the loan calculator and mortgage calculator. For lump-sum future value without the full contribution workflow, the future value calculator and investment calculator may also help. Each tool uses consistent formatting so you can compare assumptions across pages.
Summary
This free interest calculator estimates compound growth with initial and periodic contributions, flexible compounding, optional tax on interest, and an inflation-adjusted view of purchasing power. It is built for planning and education: model scenarios, export via print, and sanity-check ideas—then confirm material decisions with a qualified financial or tax professional when appropriate.