How is compound interest calculated?

Each compounding period, any contribution is added to the balance and then the balance earns its periodic rate (the annual rate divided by the number of periods per year). Because each period's growth is applied to a larger balance, earnings start earning their own earnings — that snowball is what makes the curve bend upward over time.

Is this calculator adjusted for inflation?

No. It shows nominal dollars at a single smooth rate. Real-world returns bounce around year to year, and inflation reduces what the ending number will actually buy, so treat the result as a rough middle rather than a promise.

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Compound Interest Calculator

Q: What return rate should I use?

There is no correct answer, only assumptions. Many people model a diversified stock portfolio somewhere in the 6-8% nominal range and a more conservative mix lower, but past returns do not guarantee future results. Try a range of rates and see how much the outcome moves.

See how a pot of money grows over time — with or without regular contributions. Everything runs in your browser; nothing is sent anywhere.

Starting amount

Contribution

Contribution amount is per

Annual return rate

Years

Compounding

Future value

Starting amount

Contributions added

Interest earned

Growth over time

Money you put in Total balance

Money you put in — 50% Interest earned — 50%

Worth knowing: this shows a single smooth rate in today's dollars. Real returns bounce around year to year, and inflation quietly shrinks what the ending number will actually buy — treat it as a rough middle, not a promise. Contributions are counted at the start of each period (the annuity-due convention), so results run slightly higher than calculators that credit them at the end — neither is wrong, just a different assumption. Choosing Monthly or Daily compounding treats your rate the way a bank quotes an APR, so a typed 7% works out to about 7.2% a year. Keep Annual if you meant 7% flat — which is how stock-market returns are normally quoted.

How compound interest actually works

Compound interest is what happens when your earnings start earning. In a simple-interest world, $10,000 at 7% pays you $700 every year forever. With compounding, year one pays $700 — but year two pays 7% on $10,700, year three on $11,449, and so on. The gap looks trivial early and enormous later, which is why the curve bends upward instead of running straight.

Each compounding period this calculator does two things, in order: it adds any contribution you're making, then it applies that period's share of the annual rate to the whole balance. Run that loop for enough periods and the balance separates from the money you actually put in — the space between those two lines is interest.

How this calculator gets its answer

There's no trickery to it — it simply walks forward through time, one period at a time. Add your contribution, add that period's growth, move to the next period, repeat until you run out of years. Doing it step by step (rather than with one big formula) is what lets it handle any contribution schedule without the math getting unwieldy.

Show me the actual formula

For a single lump sum with no contributions, the textbook version is:

A = P(1 + r/n)^(nt)

Your starting amount is P, r is the annual rate written as a decimal (7% becomes 0.07), n is how many times a year it compounds, and t is the number of years. Once you start adding money regularly, the tidy formula stops being tidy — which is exactly why the calculator above steps through period by period instead.

The part people underestimate: time

Of the three levers — how much you start with, how much you add, and how long you leave it alone — the last one does the heaviest lifting, because it's the exponent. Try it above: take a scenario and add ten years, then instead try doubling the contribution. At stock-like returns the extra decade usually wins — at 7%, roughly $994k versus $866k for doubling the contribution. At low, savings-account rates the extra money wins instead; the higher the return, the more the exponent does the work.

There's a moment worth finding in your own numbers: the year when total interest earned overtakes everything you've contributed. Before it, you're mostly funding the account. After it, the account is mostly funding itself.

Common questions

Does compounding frequency matter?

A little, not a lot. At the same annual rate, daily compounding beats annual compounding — but by a rounding error next to your contribution amount, your rate, and your time horizon. Don't agonize over it.

Is this adjusted for inflation?

No. The result is in nominal dollars. A rough way to think in today's money is to subtract inflation from your return assumption (say, use 4–5% instead of 7%) and read the result as purchasing power rather than a future account balance.

What return rate should I use?

There's no correct answer, only assumptions. Many people model a diversified stock portfolio somewhere in the 6–8% nominal range, and a more conservative mix lower. Past returns don't guarantee future ones — the honest move is to try a few rates and notice how much the ending number swings.

Does this account for taxes or fees?

No. Investment fees and taxes on gains both drag on real-world results. If you want a rough haircut, knock a few tenths of a percent off your return assumption for fees, and remember that money in a taxable account gets taxed on gains along the way.

This is one small piece of the picture

A single pot at a single rate is a useful sketch. Tesserae models the whole thing — every account, taxes on withdrawals, Social Security, Roth conversions, RMDs, and the odds your money actually lasts. Privacy-first: you enter your own numbers, and we never touch your bank login.

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