Compound Interest Calculator
↻ Updated 2026See what consistent investing becomes over time. Enter a starting amount, monthly contribution, rate and time horizon — and watch compounding do the work.
Educational calculators — always consult a licensed professional before making financial decisions.
Runs entirely in your browser — nothing you enter is sent to us.How this works
How to read your compound interest result
Two numbers matter here, and it isn't the balance. It's the split underneath it: on the defaults you put in $130,000 and the interest adds $170,851. Compounding didn't beat your contributions until year 17 — which is the whole lesson, and the reason most people quit before it happens.
How compound interest builds a balance month by month
Compound interest is interest that earns interest. Simple interest pays only on your original principal, so it grows in a straight line; compound interest pays on principal plus everything already credited, which curves. Over one year the two are nearly identical. Over twenty they aren't close.
This calculator doesn't use a single closed-form equation — it iterates. Each period it multiplies the balance by the periodic rate, then adds your contribution. The periodic rate is the annual rate divided by the number of compounds per year, which is why 7% compounded monthly is really 0.5833% applied 240 times.
periodic rate = annual rate ÷ compounds per year periods = years × compounds per year repeat each period: balance = balance × (1 + periodic rate) + contribution interest earned = final balance − total contributed total contributed = principal + (contribution × periods)
- principal
- What you start with, credited on day one — it compounds for the full term, which is why early money is worth more than late money
- contribution
- What you add each period — you enter a monthly figure; the tool converts it to a per-period amount — $500/mo becomes $16.44/day at daily compounding
- annual rate
- The nominal yearly rate, before tax and inflation — 7% default; the S&P 500's long-run nominal return including dividends is roughly 10%, or about 7% after inflation
- compounds per year
- How often interest is credited — 365, 12, 4 or 1 — raises the effective yield: 7% compounded monthly is a 7.229% APY, compounded daily 7.250%
- periodic rate
- The annual rate divided across the periods in a year — 7% ÷ 12 = 0.5833% a month
- balance
- The running total, carried into the next period — index 0 is your principal before any interest
The gap between nominal rate and effective yield is where compounding frequency lives, and it is smaller than the marketing suggests. A 7% nominal rate is a 7.000% effective annual yield compounded annually, 7.229% monthly, and 7.250% daily. Daily compounding is worth 25 basis points a year over annual — real, but a rounding error next to the rate itself. On a $10,000 lump with no contributions, twenty years of daily compounding beats annual by $1,850 ($40,547 against $38,697).
One quirk worth knowing before you trust the frequency selector: changing it also changes when your contributions land. At monthly you add $500 twelve times a year; at annual the tool adds $6,000 once, at year end. So the drop from $300,851 to $284,670 when you switch to annual compounding is mostly contribution timing, not compounding. For a projection that holds contributions monthly and varies only the return, use the investment growth calculator.
Worked examples
Example: $10,000 plus $500 a month at 7% for 20 years
The calculator's defaults, compounding monthly. Follow along on the page — every figure below is the tool's own output.
| Starting principalcompounds for all 240 months | $10,000 |
| Total contributed$10,000 + ($500 × 240) | $130,000 |
| Balance after month 1$10,000 × 1.005833 + $500 | $10,558 |
| Balance after year 1barely ahead of what you put in | $16,919 |
| Balance after year 10halfway in time, a third of the way in money | $106,639 |
| Interest overtakes contributionsbalance $220,610 vs $110,000 paid in | month 200 |
| Final balanceafter 240 months | $300,851 |
| Interest earned131% on top of what you contributed | $170,851 |
The curve is the point. At year 10 you're at $106,639 — nowhere near half of $300,851, despite being halfway through. The second decade produces $194,212 of the balance against the first decade's $106,639, using the same $500 a month. Nothing changed except how long the early dollars had to work.
Example: the same 20 years with a 22% tax on interest each year
The calculator ignores tax. In a regular US brokerage or savings account, interest is taxed as ordinary income the year it's credited (IRS Topic 403), so the money paying next year's interest is already smaller. Modelling that means dropping the growth rate to 7% × (1 − 0.22) = 5.46%.
| Untaxed balance at 7%what this page shows | $300,851 |
| Net rate after 22% tax7% × 0.78 | 5.46% |
| Balance at 5.46%same contributions, taxed yearly | $246,526 |
| Cost of the tax drag18% of the untaxed balance | $54,325 |
| Same at a 15% ratequalified dividends / long-term gains | $262,431 |
$54,325 — and notice it dwarfs every compounding-frequency decision on this page by a factor of thirty-five. The 22% bracket isn't paying 22% of the interest; it's paying 22% of the interest every year, then losing the compounding on what it paid. This is the arithmetic that makes a 401(k) or IRA structurally different from a taxable account, not a matter of preference.
Frequently asked questions
Is compound interest taxed every year?
In a taxable US account, yes. Interest credited to an account you can withdraw from is taxable the year it becomes available, at ordinary income rates — it lands on a 1099-INT whether or not you touch it (IRS Topic 403).
That yearly bite is why tax-deferred accounts compound differently rather than just better. On this page's defaults, paying 22% on interest annually costs $54,325 over twenty years — the balance falls from $300,851 to $246,526. Inside a 401(k) or traditional IRA nothing is taxed until withdrawal; inside a Roth, qualified withdrawals are never taxed. Qualified dividends and long-term capital gains get preferential rates (0%, 15% or 20%) instead, which at 15% costs $38,420 over the same period. The 401(k) calculator projects the deferred version.
What's the difference between daily and monthly compounding?
Less than almost anyone expects. Compounding turns a nominal rate into a slightly higher effective yield, and the gain shrinks fast as you slice finer. At 7% nominal: annual yields 7.000%, quarterly 7.186%, monthly 7.229%, daily 7.250%. The theoretical ceiling — continuous compounding — is 7.251%, so daily captures all but a hundredth of a point of everything frequency could ever give you.
In dollars on this page's defaults: $300,851 monthly against $302,374 daily — $1,523 across twenty years, or 0.5%. The rate itself matters far more: moving 7% to 8% adds $42,928 over the same period — twenty-eight times what daily compounding buys you. If a bank advertises daily compounding as the reason to open an account, read the APY instead, which already includes it.
What's the difference between simple interest and compound interest?
Simple interest pays only on the original principal, so it's linear: $10,000 at 7% simple pays $700 every year, and after 20 years you have $24,000. Compound interest pays on principal plus accumulated interest, so it's exponential: the same $10,000 with no contributions reaches $40,387 in 20 years compounded monthly. Same rate, same term, $16,387 apart — and the whole difference is interest earning interest.
Which one you get depends on the product, not your preference. Most US mortgages, auto loans and federal student loans accrue simple interest on the outstanding balance. Savings accounts, CDs and money market accounts compound. Credit cards compound daily — this page's mechanism, pointed at you.
What is a realistic compound interest rate to use?
It depends entirely on what the money is in, and the honest range is wide. The S&P 500's long-run average is about 10% nominal including reinvested dividends, or roughly 7% after inflation. Bonds have historically run nearer 4-5% nominal. A high-yield savings account pays whatever the Fed funds rate allows, which has ranged from under 1% to over 5% within a single decade.
Two warnings the average conceals. First, that 10% is an average almost no individual year produces — Dimensional's analysis of 93 calendar years found the S&P landed within 10% ± 2 points only six times. Second, this calculator applies your rate every period without variance, which no market does. A constant-return projection and a volatile market with the same average end at different places, and the volatile one ends lower.
How long does it take for compound interest to beat what I put in?
On this page's defaults, month 200 — a little under 17 years of a 20-year plan. Up to that point your contributions are the larger half of the balance. That single fact explains why compounding feels fake for a decade and then obvious: at year 10 you have $106,639 against $60,000 contributed, an unremarkable result, and by year 20 the interest alone is $170,851.
The crossover moves with the rate and the ratio of principal to contributions. A bigger starting balance crosses sooner because it has nothing to catch up to; heavy monthly contributions push it later, since you keep resetting the race. The millionaire calculator shows the same effect against a target instead of a term.
Where this compound interest calculator departs from a real account
The arithmetic is exact. The assumptions behind it are the approximation, and three of them are load-bearing.
- No tax, at all — Interest in a taxable US account is ordinary income in the year credited (IRS Topic 403). Modelling 22% on the defaults drops the balance from $300,851 to $246,526 — a $54,325 gap this page never shows. Inside a 401(k), IRA or HSA the untaxed figure is closer to right.
- No inflation — Every figure is a future dollar. $300,851 in 2046 buys what about $166,000 buys today at 3% inflation. The rate you enter is nominal; a 7% return with 3% inflation is a 3.88% real return, not 4%.
- The rate never varies — Interest is applied identically every period. Real returns are volatile, and volatility drags compound growth below the arithmetic average — this is why CAGR and average annual return differ. Savings rates also reset with the Fed; a 20-year projection at today's APY assumes a rate that has never held for 20 years.
- The frequency selector moves two things — Switching to annual compounding also switches your $500/month into $6,000 paid once at year end. That's why the balance drops $16,181 — most of it is contribution timing, not compounding frequency. Isolate the effect by setting the monthly contribution to $0.
- No fees — Expense ratios, advisory fees and account charges come off the return before it compounds. A 0.5% annual fee against the 7% default is a 6.5% net rate — mechanically identical to a rate cut, and it compounds against you exactly as hard as interest compounds for you.
Rates, brackets and limits here are checked against primary sources. If a number still looks off, email support@realmoneyiq.com and we'll review and fix it.
RealMoneyIQ provides free educational calculators, not financial, tax, investment or legal advice. Results are estimates based on the assumptions you enter and publicly published rates; your actual outcome will differ. Always confirm decisions with a licensed professional who knows your full situation.