Why compounding is called the eighth wonder
With simple interest, only your original deposit earns returns. With compound interest, every period's gains join the principal and start earning themselves. The effect is small at first — then explosive. Someone investing $500/month at 7% has about $260,000 after 20 years but over $600,000 after 30. The last 10 years do more work than the first 20 combined.
That is why starting early beats investing more later. A 25-year-old investing $300/month until 65 ends up with roughly double what a 35-year-old investing $600/month achieves — same monthly effort, wildly different outcomes, purely because of extra compounding time.
How the maths works
Each compounding period multiplies your balance by (1 + r/n). Regular monthly contributions are added at the start of each month in this calculator, then compound for the remaining time — matching how most savings plans work.
A = P(1 + r/n)nt + PMT × [((1 + r/n)nt − 1) / (r/n)]
Three levers that matter most
- Time — the most powerful lever. Every extra year multiplies all previous growth.
- Rate of return — 2% more per year roughly doubles the outcome over 30 years.
- Contributions — steady deposits beat perfect timing; automate them.
Common questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Each period's gains start earning their own returns, so growth accelerates over time.
How is compound interest calculated?
The formula is A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding frequency per year, and t is years. Regular contributions each compound for their remaining time.
What is a realistic annual return?
Global stock markets have historically returned around 7–10% per year before inflation over long periods. Savings accounts typically pay 1–5%. Higher expected returns always come with higher risk.
How often should interest compound?
More frequent compounding grows money slightly faster, but the difference is small next to the rate itself and the time invested. Starting early matters far more than compounding frequency.
Is this calculator free?
Yes — 100% free, no signup. All calculations happen in your browser.
How much will my monthly deposits grow to with compound interest?
A compound interest calculator with monthly contributions shows exactly how your monthly deposits grow: enter your monthly deposit, the expected annual rate, and the number of years, and you get a year-by-year breakdown plus a visual growth chart. Monthly contributions boost the final balance dramatically because every deposit starts compounding the moment it is added.
What is the difference between monthly contributions and lump-sum investing?
With a lump sum, the full amount compounds from day one, so it usually grows the most. Monthly contributions start smaller but build steadily — and for most people, investing a fixed amount each month (dollar-cost averaging) is the realistic way to build long-term wealth without timing the market.
Projections only, not financial advice. Real returns vary and all investing involves risk.