- 1Enter your starting Initial Investment amount ($).
- 2Enter your recurring Monthly Contribution amount ($).
- 3Specify your Estimated Annual Return rate (%) and Investment Duration in years.
- 4Review the future investment balance and see the growth split between contributions and interest earned.
Compound interest is interest earned on both your original principal and accumulated interest from prior periods. Over time, compounding creates exponential growth as earned interest generates additional earnings.
Growth of starting deposit P at monthly interest rate r over n total months.
FV_P = P · (1 + r)ⁿAccumulated value of recurring monthly deposit PMT compounded over time.
FV_PMT = PMT · [ (1 + r)ⁿ - 1 ] / rCombined final balance of initial principal plus all monthly deposits and interest.
Total Balance = FV_P + FV_PMT | Interest Earned = Total Balance - Total ContributionsTotal Contributions = $10,000 + ($500 × 240) = $130,000Interest Earned = $344,634 - $130,000FV = P × (1 + r)^n with r = 0.08/12, n = 240 → 10000 × (1.006667)^240- Start Early: Time is the most critical factor in compound growth. Starting 5 or 10 years earlier dramatically increases final balance due to exponential compounding.
- Monthly Compounding Model: This calculator models monthly compounding with monthly contributions added at the end of each month.
- Rate of Return Assumption: Annual returns are estimated averages. Real market returns fluctuate year to year and inflation is not subtracted.
What is the difference between simple interest and compound interest?
Simple interest is calculated only on the original principal balance. Compound interest is calculated on both principal balance and previously accumulated interest.
How does contribution frequency affect growth?
Making regular monthly contributions increases the principal balance faster, allowing compound interest to generate higher returns over time.
Are annual return rates guaranteed?
No. Estimated return rates represent hypothetical averages for planning purposes. Actual investment returns vary based on asset class and market performance.
How are monthly contributions compounded?
Each monthly contribution is grown by (1 + r)^(n − i), where i is the month it was made — so earlier contributions compound for longer. The calculator sums every contribution's future value plus the initial deposit's.
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