Phase 2 · Wealth & Leverage
Compound Interest Calculator
Time turns small, steady money into a fortune. Set your starting amount, monthly add and rate, and watch compounding do the heavy lifting — including the year interest overtakes your savings.
How does compound interest actually work?
Each period's growth is applied to the balance including all previous growth, so returns start earning returns. With regular contributions the balance follows balance = balance × monthly growth + contribution, month after month. The result is that time, not the size of the contribution, does most of the work.
- Worked example (defaults on this page): $10,000 plus $500/month at 7% for 20 years grows to $300,851. You contributed $130,000 of that — the other $170,851 is compounding.
- Compounding frequency matters less than people think: 7% compounded monthly is a 7.23% effective APY, only 0.23 points above the simple rate.
- Interest earned = future value − total contributed. There is a crossover year where annual growth first exceeds annual contributions — after it, the account grows faster than you can fund it.
- Starting earlier beats contributing more. Delaying this same plan by five years costs far more than five years of $500 deposits, because the lost years are the ones with the most compounding left to run.
Balance over time
Under the hood
The math, fully exposed
We simulate month by month so contributions and compounding frequency are exact:
Monthly growth = (1 + rate ÷ n)n ÷ 12 (n = periods/year)
Each month: balance = balance × monthly growth + contribution
Total contributed = starting amount + contribution × months
Interest earned = future value − total contributed
Effective APY = (1 + rate ÷ n)n − 1
- Time is the dominant force: because growth compounds, the last decade of a long horizon adds far more than the first. Starting earlier beats contributing more.
- Interest overtakes savings: on a long enough horizon, the interest earned exceeds everything you ever put in — the moment compounding truly takes over.
- Rate matters more than frequency: a higher return (or lower fees eating into it) moves the needle far more than compounding daily vs annually.
Your directives
What to do next, based on your numbers
Adjust the sliders to generate tailored recommendations.
Answers
Frequently asked questions
What is compound interest?
Compound interest is interest earned on both your original money and the interest it has already earned. Unlike simple interest (which only ever pays on the principal), compounding makes your balance grow faster and faster over time — interest earning interest earning interest. Albert Einstein reportedly called it the eighth wonder of the world for good reason.
How is compound interest calculated?
For a lump sum, future value = principal × (1 + r/n)n·t, where r is the annual rate, n the number of compounding periods per year, and t the years. With regular contributions, you add the future value of each deposit too. This calculator simulates month by month so your monthly contributions and chosen compounding frequency are both handled exactly.
Does compounding frequency really matter?
A little. Compounding daily instead of annually at the same rate slightly raises your effective yield (APY) — a 7% rate compounded daily is about 7.25% APY versus 7% compounded annually. The effect is real but modest; the rate and especially the time horizon matter far more than how often interest is credited.
How long will it take to double my money?
Use the Rule of 72: divide 72 by your annual return to estimate the years to double. At 7%, money doubles in about 10.3 years; at 9%, about 8 years. It's an approximation, but a handy one — and it shows why even a couple of extra percentage points of return dramatically change your long-term outcome.