Compound interest calculator
See what a starting balance plus regular deposits grows into, and how much of the final figure is interest rather than your own money.
Balance after 20 years
$300,851
57% of it is interest, not your own money
- You put in
- $130,000
- Interest earned
- $170,851
- Growth multiple
- 2.31
| Starting balance | $10,000 |
|---|---|
| Contributions | $120,000 |
| Interest | $170,851 |
| Final balance | $300,851 |
At 7% over 20 years, 57% of the balance is interest — the deposits made in the first five years do most of the work.
How this is calculated
How this is calculated
The growth formula
Each period the balance earns the periodic rate, then the deposit is added. Deposits at the start of a period earn one extra period of interest, which is worth about 0.6% more over 20 years at 7%.
FV = P(1+i)^N + PMT · ((1+i)^N − 1) / iWhen compounding and deposits disagree
Daily compounding with monthly deposits needs a rate conversion, not a daily loop: i = (1 + r/n)^(n/m) − 1, where n compounds a year and m deposits a year. Skipping this is the most common error in published calculators.
Worked example: $10,000 plus $500 a month at 7% for 20 years
| Starting balance | $10,000 |
|---|---|
| Monthly deposit | $500 |
| Return | 7% p.a., compounded monthly |
| Years | 20 |
| Final balance | $300,851 |
|---|---|
| You deposited | $130,000 |
| Interest earned | $170,851 |
Interest overtakes your own contributions in year 17. Extending to 25 years reaches $462,290 — another $161,439 without changing the deposit.
What this assumes
- The return is constant — real markets are not.
- No tax on interest or gains.
- No fees, which typically cost 0.2–1% a year.
- Deposits never change with inflation.
Where this commonly goes wrong
- A nominal 7% compounded monthly is an effective 7.23% a year — quoted rates and effective rates are not the same number.
- Inflation is not deducted here. At 2.5% inflation, $300,000 in 20 years buys what about $183,000 buys today.
- Fees compound too: a 1% annual fee costs roughly 18% of the final balance over 20 years.
Questions
How much do I need to save each month to reach $1 million?
Starting from zero at 7% a year, about $1,920 a month for 20 years, or $820 a month for 30 years. The extra decade more than halves the required deposit, because the later years are almost entirely interest.
What return should I assume?
Use a rate you can defend. Cash and term deposits track the policy rate; diversified share portfolios have historically returned around 7% a year before inflation over long periods, with large falls along the way. Model a lower rate as a sanity check.
Does compounding frequency make much difference?
Less than most people expect. On a 7% nominal rate, moving from yearly to monthly compounding adds about 0.23 percentage points of effective return; monthly to daily adds under 0.01. The deposit amount matters far more.
Should I deposit at the start or end of the month?
The start, if you have the choice. Each deposit earns one extra period of interest, which compounds. Over 20 years at 7% that timing is worth roughly 0.6% of the final balance — small, but free.
Why is my bank account not growing like this?
Two reasons usually. The advertised savings rate often applies only with conditions met each month, and interest is taxed at your marginal rate. Both reduce the effective return well below the headline figure used here.
How do I account for inflation?
Enter a real return instead of a nominal one: subtract expected inflation from your assumed return. At 7% nominal and 2.5% inflation, model 4.4% rather than 4.5% — the exact figure is (1.07 ÷ 1.025) − 1.
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Sources
This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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