Last updated: May 2026
See how your investments grow over time with the power of compounding.
Investment Details
Results
Year-by-Year Growth
| Year | Balance | Contributions | Interest Earned | Total Interest |
|---|
Compound interest formula: A = P(1 + r/n)^(nt), where P = principal, r = annual rate, n = compounding periods per year, t = time in years.
With monthly contributions, each payment is compounded from the month it's made. This dramatically accelerates growth — contributions made early benefit from more compounding periods.
The Rule of 72: Divide 72 by your interest rate to estimate how many years it takes to double your money. At 7% annual return, your money doubles roughly every 10.3 years.
More frequent compounding (daily vs. annually) has a small but real effect. At 7%, daily compounding yields about 7.25% effective annual rate, vs. exactly 7% for annual compounding.
Compound interest means you earn interest on both your original principal and the interest already accumulated, creating exponential growth over time. The formula is:
Where A is the final balance, P is the starting principal, r is the annual interest rate as a decimal, n is compounding periods per year, t is time in years, and PMT is the optional regular contribution.
Worked example: $10,000 invested at 8% annually for 30 years, compounded monthly, with $200/month contributions grows to approximately $389,000. Of that, $82,000 is contributions ($10,000 initial plus $200 times 360 months). The remaining $307,000 is pure compound growth.
The year-by-year table shows the compounding effect in action: growth accelerates sharply in later years as the balance itself generates increasingly large returns.
More frequent compounding means slightly higher returns. Daily compounding earns marginally more than monthly, which earns more than annual compounding. The practical difference between daily and monthly is small - on $10,000 at 8% for 30 years the difference is about $500. The interest rate itself matters far more than compounding frequency.
The Rule of 72 is a quick mental math shortcut: divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 8% annual return your investment doubles in roughly 9 years. At 6% it takes about 12 years. This rule is accurate to within 1-2 years for rates between 4% and 15%.
The U.S. stock market (S&P 500) has returned roughly 10% annually before inflation and 7% after inflation over long historical periods. Savings accounts currently yield around 4-5%. Bonds typically return 3-5%. For retirement projections many financial planners use 6-7% as a conservative real return for a diversified portfolio.
This calculator shows nominal (not inflation-adjusted) growth. To see real purchasing power, subtract the expected inflation rate (historically around 3%) from your expected return before entering it. A 10% nominal return in a 3% inflation environment is roughly a 7% real return.
Compound interest is the process of earning interest on both your original principal and on the interest already accumulated. Unlike simple interest — which only applies to the original deposit — compound interest causes balances to grow exponentially. The longer your money compounds, the more dramatic the effect. A 7% annual return does not merely double your money in roughly 20 years; it multiplies it more than seven-fold over 30 years.
The table below shows how a one-time $10,000 deposit grows at various interest rates with annual compounding. Notice how small differences in rate create enormous gaps over time — the difference between 5% and 10% over 30 years is not double the money, it is four times the money.
| Rate | 10 Years | 20 Years | 30 Years |
|---|---|---|---|
| 3% | $13,439 | $18,061 | $24,273 |
| 5% | $16,289 | $26,533 | $43,219 |
| 7% | $19,672 | $38,697 | $76,123 |
| 10% | $25,937 | $67,275 | $174,494 |
| 12% | $31,058 | $96,463 | $299,599 |
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from prior periods. Each period, your earned interest is added to the balance and itself begins earning interest. This creates exponential — rather than linear — growth over time.
How often does compounding happen?
Compounding frequency varies by account type. Savings accounts typically compound daily or monthly. CDs and bonds often compound semi-annually. Stock market investments compound in real time as prices change. The more frequently interest compounds, the faster your balance grows — though the difference between daily and monthly compounding is modest in practice.
What is the Rule of 72?
The Rule of 72 is a quick mental math shortcut: divide 72 by your annual interest rate to estimate how many years it takes for your money to double. At 8% you double in about 9 years; at 4% it takes about 18 years. The rule is accurate within 1–2 years for rates between 4% and 15%.
What is the difference between compound and simple interest?
Simple interest applies only to the original principal each period. Compound interest applies to the growing balance, including previously earned interest. On a $10,000 deposit at 7% over 20 years, simple interest returns $24,000; compound interest returns $38,697 — a $14,697 difference created entirely by interest earning interest.
How does compound interest work against you in debt?
The same mechanism that grows savings also grows debt. Credit card balances compounded at 20–28% APR can double in as little as 3–4 years if you only make minimum payments. A $5,000 credit card balance at 24% APR with minimum 2% payments takes over 30 years to pay off and costs more than $12,000 in total interest.