🌱 Compound Interest Calculator
Compound interest is growth earning growth: your money makes money, then THAT money makes money. Everyone has heard the phrase; almost nobody has run their own numbers. The result usually splits into two piles that shock people: what you contributed, and what time added for free.
The US stock market has averaged roughly 7 percent a year after inflation over long periods. Savings accounts run far lower.
12 for monthly (typical for investments and savings), 4 for quarterly, 1 for annually.
Balance at the end
$150,425
What you put in
$65,000
What growth added
$85,425
Start with $5,000, add $250 a month at 7 percent, and in 20 years you have $150,425. You put in $65,000; compounding added $85,425 on its own. Growth contributed more than you did; that is what time in the market does.
Estimates for planning, not financial advice. Your real numbers will vary; that is exactly why you track them.
Does this resonate?
Your business is the highest-interest account you will ever own
Markets compound at 7 percent a year. A working small business routinely returns its owner many times that on the money and effort invested. See what that could look like.
Explore what you could build →Good questions about this math
What formula does this use?
The standard compound interest formula: the starting amount grows by P times (1 + r/n) to the power of n times t, and each contribution grows the same way from the period it is added (the future value of an annuity, ((1+i)^N - 1)/i per period). Monthly contributions are spread across the compounding periods you choose.
What rate should I assume?
For long-term stock index investing, 6 to 8 percent a year is the range history supports (roughly 10 percent before inflation, 7 after). Using your savings account rate shows why savings accounts alone do not build wealth. Whatever you pick, run a lower rate too and make sure the plan still works.
How often does compounding frequency matter?
Less than people think. $10,000 at 7 percent for 20 years is about $38,700 compounded annually and about $40,300 compounded monthly. The rate and the years do the heavy lifting; frequency is a rounding story.
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