Compound Interest Calculator with Monthly Contributions
See how regular savings and compounding can build wealth over time. Includes interactive growth chart, total invested vs earnings, and simple interest comparison.
How Compound Interest Works
Compound interest is "interest on interest" — earnings generate more earnings over time. The formula for future value with regular contributions is:
FV = P × (1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]
Where: P = initial principal, PMT = monthly contribution, r = annual rate, n = compounds per year, t = years.
Key insight: Time is the most powerful factor. Starting early (even small amounts) beats larger later contributions due to exponential growth.
Historical stock market average (S&P 500 with dividends): ~10% nominal, ~7% after inflation (long-term realistic assumption for diversified portfolios).
Compounding Frequency Impact (Example: $10,000 initial + $500/mo @7% for 30 years)
| Frequency | Final Balance | Total Growth |
|---|---|---|
| Daily | ~$623,000 | ~$437,000 |
| Monthly | ~$620,000 | ~$434,000 |
| Quarterly | ~$615,000 | ~$429,000 |
| Annually | ~$607,000 | ~$421,000 |
More frequent compounding adds up over decades — choose accounts with monthly/daily if possible.
Real-Life Example: Retirement Savings
Start with $10,000 at age 30, add $500/month, assume 7% average return (historical stock market after inflation/fees), monthly compounding.
After 30 years (age 60): ~$620,000 total (~$434,000 growth on $190,000 invested).
Wait until age 40 (same inputs, 20 years): Only ~$260,000 total. Starting 10 years earlier adds ~$360,000 — power of compounding!
Tips to Maximize Compound Growth
- Start early — even $100/month at 7% for 40 years grows to ~$260,000.
- Automate contributions to stay consistent.
- Use tax-advantaged accounts (401(k), IRA) to reduce drag from taxes.
- Diversify investments for realistic 6–8% long-term returns (stocks/bonds mix).
- Reinvest dividends/interest automatically.
- Account for inflation (~2–3%/year) — real returns are nominal minus inflation.
Frequently Asked Questions
What is a realistic annual return to assume?
Historical S&P 500 average (with dividends reinvested): ~10% nominal, ~7% after inflation. Use 6–8% for conservative planning (2026 long-term forecasts from Schwab/Goldman Sachs ~5.9–10%).
Why does time matter more than amount?
Compounding is exponential — early dollars have decades to grow. $100/month for 40 years at 7% ≈ $260k; same for 20 years ≈ $52k.
Does this include taxes or fees?
No — results are pre-tax/pre-fee. In taxable accounts, expect 15–20% drag on gains. Use retirement accounts to minimize this.
How does inflation affect results?
Inflation erodes purchasing power (~2–3%/year). A $1M balance in 30 years might buy what $400–500k buys today at 3% inflation.
Is monthly compounding better than annual?
Yes — more frequent compounding adds slight extra growth over long periods (e.g., ~$5–10k difference over 30 years in large examples).
Can I use negative contributions (withdrawals)?
Currently no — this tool assumes positive growth/savings. For drawdown/retirement spending, use a different calculator.
What return should beginners use?
Start conservative: 5–7% for balanced portfolios. Higher (8–10%) assumes stock-heavy allocation with higher risk/volatility.
How accurate are these projections?
Good for illustration — real returns vary year-to-year. Markets can go down. Use as planning tool, not guarantee.
Should I invest in stocks for compound growth?
Historically yes for long horizons (10+ years) — diversified index funds (e.g., S&P 500) average higher returns than savings accounts.
What if I increase contributions over time?
This tool assumes fixed monthly amount. In reality, raise contributions with salary increases for even better results.
Updated January 2026 • Sources: Investopedia, Investor.gov, Schwab Capital Market Expectations 2026, historical S&P 500 data.