Compound interest calculator

Key terms (used throughout this page)

Compound interest

Interest calculated on principal + previously accumulated interest. The reason $1 invested at 10% becomes $17.45 over 30 years instead of $4 with simple interest.

APY (Annual Percentage Yield)

The effective annual return after compounding. 5% APR compounded daily becomes 5.127% APY. Compare APYs, not APRs, when shopping for savings products.

Principal

The initial sum you start with, before any interest is earned. In a loan context, the amount borrowed (excluding interest).

Future Value (FV)

The projected balance at a specified future date. The calculator's main output. Nominal (not inflation-adjusted) unless you subtract expected inflation from the rate.

How to use this compound interest calculator

1. Enter your starting balance. Use $0 if starting from scratch — the math still works.
2. Add monthly contribution. Each deposit compounds from day one alongside the principal.
3. Set the annual rate. See the rate guidance section below for HYSA / CD / index fund / portfolio defaults.
4. Choose years. Match your goal horizon — 1-3 short, 10-15 medium, 25-40 retirement.
5. Read the result. Future value, total contributions, and total interest earned. Interest typically exceeds contributions after year 15-20 at 7%+ rates.

The compound interest formula

With contributions added at the end of each period, future value equals:

FV = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) / (r/n)]

P   = principal (initial deposit)
r   = annual interest rate (decimal)
n   = compoundings per year (1, 12, or 365)
t   = number of years
PMT = contribution per compounding period

The first term is your principal compounding. The second is the future value of an ordinary annuity — every contribution you make also compounds, from the day it's deposited.

What rate should I use?

• High-yield savings accounts: 4-5% APY in 2026. Use today's rate; HYSA rates float with the Fed funds rate. Check current top APYs in our HYSA calculator.
• CDs (1-5 year): 4-5.25% depending on term. Use the locked APY.
• S&P 500 index funds: ~10% nominal long-term average, ~7% after inflation. Use 7% for conservative real-return projections.
• Balanced 60/40 portfolio: 6-8% nominal long term.
• Bonds (Treasury / investment-grade): 4-5% in 2026.
• Cash (checking): 0.0-0.5%. Use this only to model the cost of NOT investing.

Compound interest examples

Walked example: $10,000 at 7% with $500/month, year by year

To make compounding concrete, here's the same starting scenario tracked at key milestones. Annual compounding, $500 deposited at end of each month, 7% nominal rate:

The inflection point is somewhere between year 18 and 20 — that's where compound interest produces more than your monthly deposits do. Every year after that, the gap widens. By year 40, the balance is 5.5× your total contributions.

Where compound interest stands in 2026

The Federal Reserve cut rates three times in late 2025 and the federal funds target sits around 3.75–4.0% in early 2026. Most consumer-facing rates have followed:

• High-yield savings accounts: the top names (Marcus, Ally, SoFi, Wealthfront Cash, CIT, Discover) are paying 3.6–4.5% APY in 2026, down from 5%+ at the 2024 peak. Rates float — check current rates monthly.
• 1-year CDs: 4.0–4.5% from top issuers, with brokered CDs at the higher end. Locks in the rate against further Fed cuts.
• 5-year CDs: 3.75–4.25%, slightly inverted vs short-term — the market expects more cuts.
• Money market funds: tracking the federal funds rate at ~3.5–3.8% net of expense ratio.
• S&P 500 nominal CAGR last 30 years: ~10.5% (1995–2025). Long-run real ~7% after inflation. Use 7% real / 10% nominal for retirement projections.
• Inflation: headline CPI back near 2.5% in early 2026 per BLS. Core measures slightly higher.

For projections beyond a couple years, assume rates drift down toward 3% nominal on cash — we're past the 5% HYSA peak. Index-fund return assumptions don't change with the Fed cycle.

Who this compound interest calculator is for

Simple vs compound interest: the dramatic gap

Simple interest: $10,000 at 8% for 40 years = $42,000 (principal × rate × time + principal).
Compound interest: $10,000 at 8% for 40 years = $217,245.

Same rate, same time, same starting amount. The only difference: letting interest compound on itself instead of paying out. Compound interest is the single most important mathematical concept in personal finance. Get this right and the rest is detail.

Daily vs monthly vs quarterly vs annual compounding

More frequent compounding earns slightly more at the same nominal rate, but the gap is small. Same money, four frequencies, on $10,000 at 5% APR:

Daily beats annual by 3.7% over 30 years — real money, but rate and contribution size matter far more. Don't chase compounding frequency; chase higher APY. Use our APR to APY calculator to convert between them precisely.

Why the rate matters far more than the frequency

$10,000 at 5% daily for 30 years grows to ~$44,812. At 7% annual it's ~$76,123. The 2 percentage points beat the daily-vs-annual gap by a factor of 70×. This is why investing fee selection matters: 1% in fees costs roughly 25-30% of final balance over 30 years. Use our mutual fund fee analyzer to model the exact impact.

The most-cited (and misattributed) quote on compounding

"Compound interest is the eighth wonder of the world." Often credited to Albert Einstein — but there's no evidence he said it. The sentiment is correct; the attribution is folklore. See the full fact-check.

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Compound interest calculator FAQ

Methodology & sources

Formula: standard future-value-of-an-annuity (P(1+r/n)^(nt) + PMT × [((1+r/n)^(nt)−1)/(r/n)]). Rate guidance verified against current bank APY postings, Federal Reserve H.15 rates, and Robert Shiller's CAPE dataset for S&P 500 long-run returns. Calculator and content updated 2026-07-01. Read our editorial standards and methodology.