The compound interest formula
A = P(1 + r/n)nt plus, for monthly contributions: each deposit compounds for the months that remain.P is the starting amount, r the annual rate as a decimal, n how often interest is added per year and t the years. This calculator compounds monthly and adds your contribution at the end of each month — the same convention most savings projections use.
Worked example — why starting early wins
$10,000 growing at 7% with $200 added monthly becomes about $113,000 after 20 years, of which only $58,000 came out of your pocket — the rest is interest. Start the same plan 5 years later (15 years of growth) and you end near $76,000: five fewer years of contributions cost only $12,000, but the final pot loses roughly $37,000. Time in the market is the ingredient you cannot buy back later.
The Rule of 72
A useful shortcut: divide 72 by your annual rate to estimate how many years money takes to double. At 6%, about 12 years; at 8%, about 9 years. It is an approximation, but a good one between roughly 5% and 12%.
Frequently asked questions
What is compound interest in simple words?
Interest earned on your interest. Your balance grows, so each period's interest is calculated on a bigger amount — growth that speeds up over time.
How often should interest compound?
More frequent compounding (monthly vs yearly) grows money slightly faster, but the difference is small next to the rate, the amount and — most of all — the number of years.
Does this calculator include taxes or inflation?
No. It shows nominal growth at the rate you enter. For a rough real (after-inflation) view, you can enter a rate reduced by expected inflation, e.g. 7% − 3% = 4%.
Is a 7% return guaranteed?
No. It is a common long-run planning assumption for diversified stock markets, not a promise. Savings accounts pay far less; markets can fall.