How to compute compound interest
Compound interest means interest can earn additional interest after it is added to a balance. To compute compound interest, start with the initial amount, an assumed annual rate, the number of compounding periods and the time invested. This calculator also models regular monthly additions. Its result separates your own contributions from modeled interest, so that a higher balance is not mistaken for investment profit alone.
Use the calculator in four steps
Enter the initial amount and the amount you expect to add each month. Set monthly contributions to zero for a lump-sum calculation. Next enter an assumed nominal annual rate, choose the compounding frequency and select a whole number of years. Finally choose whether deposits arrive at the beginning or end of each month. The currency changes labels only; it does not convert money or change the calculation.
Compound interest formula for a lump sum
For an initial amount without additional deposits, A = P × (1 + r/n)^(n × t). P is the principal, r is the nominal annual rate expressed as a decimal, n is compounding periods per year, and t is years. A is the final balance, including principal. Interest earned is A − P. For a 5% rate, enter 5 in the form; the equation uses 0.05.
Worked example: 10,000 at 5% for five years
With annual compounding and no additional contributions, the final amount is 10,000 × 1.05^5 = 12,762.82, rounded to two decimal places. The interest is 2,762.82. After year one, the balance is 10,500. In year two, 5% of 10,500 is 525, bringing the balance to 11,025. That extra 25 compared with the first year illustrates interest earning further interest.
How monthly contributions are calculated
Monthly deposits and annual compounding use different intervals. This tool converts the selected nominal rate to an equivalent monthly growth rate: i = (1 + r/n)^(n/12) − 1. It then grows the balance once per modeled month. This is a smooth equivalent-rate projection. For non-monthly compounding it does not reproduce a bank’s exact posting dates, day-count rules or partial-period deposit treatment.
Beginning versus end of month
For end-of-month deposits, each month follows B(new) = B(previous) × (1 + i) + C. For beginning-of-month deposits, B(new) = (B(previous) + C) × (1 + i). C is the regular contribution. Beginning-of-month money receives one additional month of modeled growth. At zero interest both choices give the same total. No intermediate balance is rounded; displayed amounts are rounded to two decimal places.
Nominal rate and effective annual rate
The effective annual rate is (1 + r/n)^n − 1. For a positive nominal rate, more frequent compounding produces a higher effective annual rate under this model. If your source already quotes an effective annual yield, use annual compounding with that yield for an equivalent constant-rate scenario. Entering an effective yield as a nominal rate and compounding it monthly would count the compounding effect again.
Read the yearly table and download
Each row shows the accumulated contributions, modeled interest and closing balance at a year boundary. The growth bars summarize balance, while the table preserves the actual numbers. Download the CSV to keep the yearly results and the input assumptions together. Total contributed includes the initial amount and every monthly deposit. The table is a projection from your inputs, not a statement from a financial institution.
What this projection leaves out
The model assumes a constant non-negative rate, unchanged monthly contributions and reinvested interest. It excludes fees, taxes, inflation, withdrawals, variable returns and currency movements. Daily compounding means 365 periods each year, without calendar-date or leap-year modeling. Supported inputs are one to 100 whole years and annual rates from zero to 100%. A scenario is not a promised return or a recommendation to buy a financial product.
Frequently asked questions
Is compound interest the same as simple interest? No. Simple interest on a fixed principal does not add prior interest to the interest-bearing amount. Can I model monthly deposits of zero? Yes, that gives the lump-sum case. Will changing currency change my return? No, it changes formatting only. Can this predict stock-market returns? No, a constant assumed rate cannot represent market volatility or guarantee an outcome. How can I compare scenarios? Change one assumption at a time and retain each CSV.
Method: constant-rate compound growth with equivalent monthly accrual and optional monthly contributions. Created and calculation-tested by Velour Trends; updated 8 November 2026. No independent financial-professional review is claimed. For educational context, see the SEC Investor.gov compound interest calculator. Its calculation conventions may differ. Report a calculation issue.