Compound Interest Calculator
Calculate compound interest and see how your money grows exponentially over time.
| Year | Balance | Interest Earned | Total Contributions |
|---|
Calculate how a lump sum (plus optional monthly contributions) grows over time with compound interest, and see the effective annual rate for any compounding frequency.
How Compound Interest Calculator Works
For a lump sum with no contributions, future value is calculated as FV = P × (1 + r/n)^(n×t), where P is the principal, r is the annual interest rate, n is how many times per year interest compounds (monthly, quarterly, daily, etc.), and t is the number of years.
If you add a monthly contribution, the calculator adds the future value of those regular deposits on top, compounding at the same rate, using the standard future-value-of-an-annuity approach.
The "effective annual rate" (EAR) converts your nominal rate into the true annual growth rate once compounding frequency is accounted for — EAR = (1 + r/n)^n − 1. More frequent compounding produces a slightly higher effective rate than the nominal rate.
See It In Action
Who Uses Compound Interest Calculator and Why
- Projecting how a lump sum deposit grows over time at a fixed interest rate before committing money to a CD or savings account.
- Seeing how adding a monthly contribution on top of a lump sum changes the ending balance versus the lump sum alone.
- Comparing the true effective annual rate (EAR) of two accounts that compound at different frequencies.
- Testing how switching from annual to monthly or daily compounding affects growth on the same nominal rate.
Mistakes to Avoid
- Comparing two accounts' nominal rates directly instead of their effective annual rates — the EAR accounts for compounding frequency, so a lower nominal rate compounded daily can actually out-earn a higher nominal rate compounded annually.
- Treating this as an investment-return calculator — the tool assumes a fixed, guaranteed rate, which is appropriate for savings accounts, CDs, and bonds, but real investment returns like stocks fluctuate year to year rather than compounding at a constant rate.
- Underestimating how much monthly contributions add over long horizons — because contributions compound alongside the original principal, even modest monthly deposits can meaningfully increase the ending balance, so leaving that field at zero can understate a realistic projection.
Tips for Best Results
- Match the compounding frequency to what your actual account uses — check your account terms, since many savings accounts and CDs compound daily or monthly while some bonds compound semi-annually.
- Use the effective annual rate (EAR), not the nominal rate, whenever you're comparing this account against a different one that compounds on a different schedule.
Fixing Common Problems
My effective annual rate is showing higher than the nominal rate I entered. — This is expected and not an error — the effective annual rate (EAR) is always equal to or higher than the nominal rate once compounding is factored in, and the gap grows larger the more frequently the account compounds.
Terms Explained
Nominal rate: The stated annual interest rate before compounding frequency is factored in.
Effective Annual Rate (EAR): The true annual growth rate once compounding frequency is applied, calculated as (1 + r/n)^n − 1, always equal to or higher than the nominal rate.