📊 Did You Know?
A common long-run stock-market reference point is ~7% annualized returns after inflation, often used for “back of the envelope” retirement math. This calculator helps you test that assumption at 10, 20, and 30 years with and without contributions. (Historical market framing, 2026)
How to Use This Calculator
- Enter your principal (starting balance).
- Enter your annual interest rate and time horizon in years.
- Select compounding frequency and add an optional monthly contribution.
The Formula Explained
The classic compound interest formula (no contributions) is:
A = P(1 + r/n)^(nt)- P: principal
- r: annual interest rate (decimal)
- n: number of compounding periods per year
- t: time in years
When you add monthly contributions, the math becomes a series of deposits where each deposit compounds for a different amount of time. That’s why a growth table is helpful: it shows how contributions and compounding interact year by year.
Simple vs. Compound Interest
Simple interest grows linearly—interest is earned only on the original principal. Compound interest grows exponentially—interest is earned on principal plus prior interest. Over short periods the difference can look small, but over decades it becomes the dominant factor in growth.
Examples at 7%
As a quick reality check, try $10,000 at 7% for 10, 20, and 30 years with monthly contributions set to $0. Then add a monthly contribution (for example $200) and see how quickly contributions begin to outweigh the initial principal. These comparisons are exactly what the year-by-year table is designed for.
Frequently Asked Questions
What is compound interest?
Compound interest is interest earned on both your original principal and on previously earned interest. Over long periods, compounding can drive most of the growth in an investment or savings balance.
How often does a savings account compound?
Many savings accounts compound daily or monthly, but it varies by bank. The compounding frequency affects how quickly interest is added to the balance and begins earning interest itself.
What is the Rule of 72?
The Rule of 72 is a shortcut to estimate how long it takes to double an amount at a given annual rate: 72 ÷ rate%. For example, at 7% it’s about 10.3 years.
Does compounding frequency matter a lot?
It matters more at higher rates and longer time horizons. Daily vs monthly compounding is usually a small difference, but over decades it can still add up—especially with contributions.
How do monthly contributions change results?
Contributions add new principal over time, and each deposit compounds for a different length of time. Even modest monthly contributions can outweigh the original principal over long horizons.