Compound Interest Calculator

Enter what you have now, what you'll add each month, the interest rate and how long you'll leave it. You'll see what it grows to, how much of that is the interest earning interest, and the balance year by year.

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Before tax, fees and inflation. The rate is treated as a yield, so money earns interest from the day it goes in.

You'll have
$50,969.84 $16,969.84 interest

$10,000.00 now and $200.00 a month for 10 years at 6.00% grows to $50,969.84, of which $16,969.84 is interest.

You put in $34,000.00
Interest earned $16,969.84
Interest share 33% of the total

What is compound interest?

Cornell's Legal Information Institute defines it as interest earned both on prior interest from earlier periods and on the initial principal. In plain words: your interest earns interest.

Source Cornell Law School LII · Compound interest ↗

Your balance year by year

TimeBalanceYou put inInterest so far
Year 1$13,083.89$12,400.00$683.89
Year 2$16,357.99$14,800.00$1,557.99
Year 3$19,834.03$17,200.00$2,634.03
Year 4$23,524.46$19,600.00$3,924.46
Year 5$27,442.51$22,000.00$5,442.51
Year 6$31,602.21$24,400.00$7,202.21
Year 7$36,018.48$26,800.00$9,218.48
Year 8$40,707.14$29,200.00$11,507.14
Year 9$45,684.97$31,600.00$14,084.97
Year 10$50,969.84$34,000.00$16,969.84

How to calculate compound interest

Work out how much one month of growth adds, repeat it for every month, then add up the starting amount and the savings, each grown the same way.

Growth each month = (1 + rate ÷ times a year) ^ (times a year ÷ 12); Balance = Start × Growth^months + Monthly × (Growth^months − 1) ÷ (Growth − 1)

Here it is with your numbers:

  1. Growth each month: (1 + 0.06 ÷ 12) ^ (12 ÷ 12) = 1.005.
  2. Over 120 months: 1.005 ^ 120 = 1.81939673.
  3. Your starting amount grows: $10,000.00 × 1.81939673 = $18,193.97.
  4. Each $200.00 contribution grows too: $200.00 × 163.87934681 = $32,775.87.
  5. Add them: $18,193.97 + $32,775.87 = $50,969.84.
  6. What you put in: $10,000.00 + $200.00 × 120 = $34,000.00.
  7. Interest: $50,969.84 − $34,000.00 = $16,969.84.

It means every $1.00 you put in grows to $1.50 by the end of 10 years.

Source Microsoft Support · FV function ↗

With interest added monthly and savings added at the end of each month, this is the same answer as Excel's FV function. Microsoft's own example: $500 now and $200 at the start of each month for 10 months at 6% grows to $2,581.40.

Simple interest compared

With simple interest, $1,000 at 10% a month for 10 months grows to $2,000. With compound interest it grows to $2,593.74. The longer the time and the higher the rate, the bigger the gap.

FAQs

How to calculate compound interest?

Multiply the amount by (1 + the rate for one period), once for every period. $1,000 at 10% for 10 periods is 1,000 × 1.110 = $2,593.74. With monthly savings, each deposit grows the same way from the day it goes in, which is how Excel's FV function works.

Source Cornell Law School LII · Compound interest ↗

How does compound interest work?

Compound interest is interest earned on the starting amount and on the interest already added. Each period the base is bigger, so the growth speeds up the longer you leave the money.

What is the difference between simple and compound interest?

Simple interest is paid only on the starting amount. Compound interest is paid on the interest too. Cornell's example: $1,000 at 10% a month for 10 months grows to $2,593.74 compounded, but only $2,000 with simple interest.

Sources

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