Compound Interest Calculator

Compound interest is interest earned on both your original money and the interest it has already earned. Each year, the pile that earns interest gets a little bigger, so the dollars stack on top of dollars instead of growing in a straight line.

A simple example: deposit $100 at 5% interest. After year 1, you have $105 (the original $100 plus $5 of interest). In year 2, you earn 5% on $105 — that's $5.25 — so you finish year 2 with $110.25. Year 3 earns interest on the full $110.25, and so on. Over decades, that small bump from "interest on interest" becomes the lion's share of your balance. The compound interest calculator above lets you see this curve for your own numbers, including the parts most sites skip — fund fees, monthly contributions, and inflation.

How to use this calculator

Get a useful projection in under 30 seconds.

1. 1

   Enter your starting balance

   Put in whatever you have invested today. Set this to 0 if you're starting from scratch.

2. 2

   Add your monthly contribution

   How much will you invest each month? Even $100 compounds into real money over 20+ years.

3. 3

   Pick years and expected return

   7% real (after inflation) or 10% nominal are reasonable defaults for a long-term stock portfolio.

4. 4

   Tune fees and inflation, then optionally compare

   Add your fund's expense ratio (0.03–0.75%) and open the advanced panel to set inflation. Click "+ Compare another scenario" to put two strategies head-to-head.

The compound interest formula

The textbook formula for the future value of a single lump sum is A = P(1 + r/n)^(nt), where P is the principal, r is the annual interest rate, n is how many times per year interest compounds, and t is the number of years. When you also make regular contributions, you add the future-value-of-an-annuity term: PMT × [((1 + r/n)^(nt) − 1) / (r/n)]. For instant compounding (the math limit), the formula collapses to A = Pe^(rt). Our calculator uses monthly compounding under the hood — for the typical investor, the difference between monthly, quarterly, and daily compounding is too small to matter (see the daily-vs-monthly section below).

Real vs nominal returns: why inflation matters

A $1,000,000 balance in 30 years sounds great, but a million in 2056 won't buy what a million buys today. "Nominal" means the raw future-dollar number; "real" means after stripping out inflation, so every dollar shown is comparable to a dollar today. Use the formula r_real = (1 + r_nominal) / (1 + r_inflation) − 1 to convert. With 10% nominal returns and 3% inflation, your real return is about 6.8%. Our calculator does this conversion for you when "Show in today's money" is on — you'll see a smaller number, but it's an honest one. Most competitor calculators skip this entirely and quietly inflate their results.

How fees and expense ratios eat your compounding

An expense ratio is the annual percentage a fund charges to manage your money. It comes straight out of your return, every year, forever. The headline numbers look small — 0.04% for a Vanguard total-market index fund, 0.75% for a typical actively-managed mutual fund. But because fees compound just like returns do (against you), the gap balloons. A $10,000 starting balance plus $500/month at 7% over 30 years grows to roughly $613,000 with a 0.04% expense ratio — and only about $548,000 with a 0.75% ratio. That's $65,000 the fund company kept instead of you, for a service that on average underperforms a cheap index fund. This is the wedge our calculator exists to surface.

Compare two scenarios side-by-side

Most compound-interest tools only let you simulate one path at a time. We let you compare two. Click "+ Compare another scenario" and the calculator splits into Scenario A vs Scenario B, with a delta headline showing how much further ahead the winner ends up. Try this on the questions that actually matter: low-fee index fund vs. 0.75% target-date fund. Starting at 25 vs starting at 35. $500/month vs $1,000/month. Three percent vs seven percent real return. The numbers will surprise you — that's the point.

What rate of return should I use? (2026 edition)

For a diversified stock portfolio, the long-run S&P 500 average return is around 10% nominal — roughly 6–7% real after inflation. Bonds are returning about 4–5% nominal in 2026, and a high-yield savings account is paying around 4%. Pick a rate based on the asset class you're modeling, not on what makes the chart look pretty. If you don't know what to pick, 7% real or 10% nominal is the conventional default for long-term equity investors. For shorter horizons (under 10 years), drop your assumed return — the market can sit flat or negative for a decade at a time.

Daily vs monthly vs yearly compounding: does it actually matter?

Compounding more often makes your balance grow faster, but for a long-term investor the difference between daily, monthly, and yearly compounding is barely noticeable. The table below shows $10,000 at 5% over 10, 20, and 30 years across compounding frequencies. The gap between annual and daily compounding is around 1% over 30 years — meaningful at scale, but dwarfed by the fee and contribution decisions you make. Our calculator uses monthly compounding because it matches how most real-world accounts actually pay interest.

Rule of 72: a 5-second mental shortcut

Divide 72 by your annual rate of return to estimate how many years it takes for your money to double. At 6% it's 12 years. At 8% it's 9 years. At 10% it's about 7.2 years. The Rule of 72 is a back-of-envelope approximation (the exact formula uses ln(2) ≈ 0.693), but it's close enough to be useful in conversation. Subtract your fund's expense ratio from your assumed return before dividing — that's the only honest way to use it.

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