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.
A worked example
Suppose you start with $10,000, add $250 a month, and earn 6% a year compounded monthly for 20 years. Your contributions add up to $70,000 — the $10,000 you began with plus $250 across 240 months. Yet the projected ending balance is about $148,600.
That means roughly $78,600 came from growth alone — more than everything you contributed. And most of that gap appears in the final years: once the balance is large, each month's 0.5% is a bigger dollar amount, so the curve steepens the longer you leave it alone. This is why people say the hardest part of compounding is simply not interrupting it.
Handy shortcuts and caveats
The Rule of 72 is a quick mental check: divide 72 by your annual return to estimate how many years it takes money to double. At 6% that's about 12 years; at 8%, about 9. It's approximate, but it captures why a couple of extra percentage points matter so much over decades.
One thing the calculator doesn't subtract is inflation. A balance that looks large in future dollars buys less than the same number today, so it's common to shave 2–3% off your assumed return to think in today's purchasing power. Taxes on gains in a normal account also reduce what you keep, which is part of why tax-advantaged accounts are so valuable for long-term compounding.