Compound interest calculator
A projection at a constant rate, which no real investment delivers. It ignores tax, charges and the fact that returns arrive unevenly. Use it to compare choices, not to predict a balance.
Compound interest is interest earned on interest already earned. A balance growing at rate r for n periods multiplies by (1 + r) raised to n. Ten thousand at 7% with $250 added monthly reaches about $170,619 after twenty years, of which $70,000 is money you put in and $100,619 is growth.
How to use this calculator
The bar under the result shows the split between what you contributed and what the money earned. On short horizons contributions dominate and the rate barely matters. On the defaults above, the crossover falls in year sixteen: at the end of year fifteen the balance is $107,730 against $55,000 contributed, so growth stands at $52,730 and is still behind, and a year later it is $60,616 against $58,000 and has passed. After that point the rate is the main thing moving the answer, and the crossover cannot be brought forward by saving harder. Only by starting sooner.
One percentage point, twenty years
Drop the rate from 7% to 6% and the same $70,000 of contributions ends at $148,612.27 instead of $170,619.05. The whole $22,006.78 difference is compounding on money that was never there in the low-rate run, and it arrives almost entirely in the last third of the term. A fee of one per cent a year removes the same amount, so a percentage taken annually off a growing balance is not comparable to a one-off charge of the same size.
What this projection cannot be
It grows the balance at a constant rate every single month, and no real investment does that. Two portfolios ending at the same balance can have taken paths a saver would experience completely differently, and a run of poor years early does more damage than the same years late once contributions are still small. Tax and charges are not modelled either. Treat the output as a way of comparing two decisions under the same assumptions, not as a forecast of a balance.
What people use it for
- Seeing what a fixed monthly standing order turns into over twenty years
- Separating the money you put in from the money the money earned
- Reading a projected balance in today’s money rather than future currency
- Testing what one percentage point less return costs over the whole term
- Finding the year at which growth starts to outweigh contributions
- Putting a number on what an annual percentage fee removes over a full term
- Comparing monthly, quarterly and daily compounding on the same money
Questions
Less than the marketing suggests. Ten thousand at 10% for ten years is $25,937.42 compounded yearly and $27,179.10 compounded daily, under 5% apart, and the ceiling is continuous compounding at $27,182.82.
$165,580.94 yearly, $170,619.05 monthly, $171,091.46 daily. The whole range is 3.3% wide, against a 13% swing from one percentage point on the rate.
Start, if you have the choice, though the effect is small. Every contribution earns one extra month of growth, which on these defaults is $759.68 over twenty years, 0.445% of the final balance.
The final balance is divided by inflation compounded over the same period. $170,619.05 in twenty years at 2.5% inflation is $104,123.85 at present-day prices.
A judgement, not a calculation. A conservative long-run figure for a diversified portfolio is often taken as 5 to 7% nominal, and past performance is genuinely not a guarantee.
Either, as long as you are consistent. Enter a nominal rate and read the today’s-money row, or enter a rate already net of inflation and set the inflation field to zero. Doing both deflates twice.
Year sixteen on the defaults here. It arrives later at a lower rate or a higher monthly amount, because a larger contribution is a larger target for the growth to catch.
A balance multiplies by (1 + r) once per compounding period, so after n periods it is the starting amount times (1 + r) to the power n. Regular contributions add a second term, one for each payment, each compounding for however long it has left to run.
On these defaults, the same as dropping the return from 7% to 6%: $22,006.78 over twenty years, on $70,000 of contributions. A percentage charged yearly against a growing balance compounds against you exactly as the returns compound for you.
No. Interest, dividends and gains are taxed differently by country and by account type, and a tax-sheltered account and a taxable one with the same headline rate do not end in the same place.
Usually because the quoted rate is an annual equivalent that already includes compounding, and entering it here alongside a compounding frequency applies the effect twice. Enter the nominal rate with the frequency, or the annual equivalent with the frequency set to yearly.
Not directly. The monthly figure is constant for the whole term. As an approximation, enter the average of what you expect to pay in over the period rather than the first year’s amount.
Run it twice. Project to the year you stop, then start a second run with that balance, no monthly contribution and the remaining years.
Yes. The final row of the table is the final balance, and each row shows what was added and what was earned inside that year, so the split under the headline can be traced back through it.
The arithmetic runs, and the balance shrinks toward the contributions rather than away from them. As a model of a falling market it is close to useless, because a real fall is never a constant monthly decline.
Entirely in your browser. No starting balance, contribution or rate is stored or transmitted, and there is nothing to sign in to.