Compound interest is the engine behind long-term investing: you earn returns not only on your original balance but also on the returns you have already accumulated. Over years, that compounding effect can dwarf your original contributions.
How compounding works
Each period, your balance is multiplied by one plus the periodic interest rate. The more frequently interest compounds — daily versus annually — the more often those gains are folded back into the balance, and the faster it grows.
The calculator above lets you vary the compounding frequency so you can see the (usually modest) difference between, say, monthly and daily compounding at the same annual rate.
Why regular contributions matter
A steady monthly contribution has an outsized impact because every dollar you add gets its own runway to compound. Contributions made early in the timeline spend the most time growing, which is why starting sooner tends to beat contributing more later.
Try setting the monthly contribution to zero and then to a small amount. The gap between the two future balances is the compounding value of those steady deposits.
Reading the results
The future balance is what your account is projected to be worth at the end of the term. Total invested is the sum of your starting balance and every contribution. Interest earned is simply the difference — the money the market did on your behalf.
These figures assume a constant rate of return, which real markets do not provide. Treat the output as an illustration of the mechanics of compounding, not a forecast.