Compound Interest Calculator

The short answer

• Each period’s interest is added to your balance, so the next period’s interest is paid on a bigger sum.
• $10,000 plus $200 a month at 7% grows to $144,573 in 20 years, of which $86,573 is interest.
• The rule of 72: money doubles in about 72 ÷ the rate years, so about 10 years at 7%.
• Inflation, taxes and fees all reduce what your money is really worth at the end.

What compound interest is

The gap starts small: in the first year both pay $500. But with compounding, each year’s interest is a little bigger than the last. Over 30 or 40 years, interest on interest usually becomes the largest part of a long-term savings or retirement account.

The formula

For a single deposit: A = P × (1 + r ÷ n)^{n × t}, where P is the starting amount, r the yearly rate as a decimal, n the number of times interest is added each year and t the number of years.

Check it by hand: $10,000 at 5% compounded once a year for 10 years is $10,000 × 1.05¹⁰ = $16,289. With regular deposits each payment grows for a different length of time, so the calculator works month by month, adding each deposit at the end of the month.

A worked example

If you raise the monthly deposit by 3% a year, in line with typical raises, the balance reaches $171,236 for $74,489 of deposits.

How the snowball builds

In year 1, interest is under 7% of the balance. By year 15, interest has almost caught up with everything deposited, and by year 20 it is well ahead. That turning point, when interest overtakes deposits, is when compounding starts to feel real.

How often interest compounds

More frequent compounding helps, but only a little: daily beats monthly by $17 here. Most online savings accounts compound daily and pay monthly. The rate and the time you leave the money matter far more.

APR vs APY

The APY (annual percentage yield) is what you actually earn in a year once compounding is included. Under the federal Truth in Savings Act, banks and credit unions quote APY on deposit accounts, so you can compare them fairly. The rate before compounding is sometimes called the interest rate or APR. A 5% rate compounded monthly has an APY of 5.116%.

The rule of 72

Divide 72 by the yearly rate to estimate how many years money takes to double. It is close for everyday rates.

The same rule works for inflation and debt: at 3% inflation, prices double in about 24 years; on a credit card at 24%, an unpaid balance doubles in about three years.

Why starting early matters

Starting ten years later means saving twice as much each month to end up in the same place. The early saver deposits $96,000; the late saver needs $144,000. That is the clearest argument for starting a 401(k) or Roth IRA as early as you can, even with small amounts.

Small rate differences, big results

Deposits are the same $108,000 in every case. Going from 6% to 8% adds about $145,753. Over long periods, every percentage point counts, which is why fees and taxes matter so much.

Raising your deposits

Under More options you can raise your monthly deposit each year. Tying increases to raises is painless: you never see the money in your paycheck. In the main example, a 3% yearly increase lifts the final balance from $144,573 to $171,236.

Real returns after inflation

Inflation reduces what your money buys. The Federal Reserve aims for inflation of 2% a year over time; the calculator uses 2.5% as a default. In the main example, $144,573 in 20 years is worth about $88,229at today’s prices. Your real return is roughly your rate minus inflation: 7% with 2.5% inflation is a real return of about 4.4%.

Savings account rates in 2026

The FDIC’s national average rate on savings accounts was about 0.38% through mid-2026, while the best-paying online high-yield savings accounts paid around 4% in September 2026. On $10,000 for a year, that is about $38 of interest against about $407.

Savings rates are variable and change with the Federal Reserve’s rate decisions. Deposits at FDIC-insured banks are protected up to $250,000 per depositor, per bank, per ownership category. Our savings goal calculator works out how much to put aside each month for a target, and the CD calculator covers fixed-term deposits.

Tax on interest and growth

Interest from savings accounts, CDs and money market accounts is taxed as ordinary income each year, even if you never withdraw it. Your bank sends Form 1099-INT if you earn $10 or more. Taxes slow compounding, because the money paid in tax no longer earns interest.

Inside a 401(k), IRA or health savings account, growth isn’t taxed each year, so the calculator’s figures, which take no tax off, apply directly. In a taxable brokerage account, dividends are taxed yearly and gains when you sell.

Fees compound too

A fund charging 1% a year takes 1% of your whole balance every year, not 1% of your gains. Over decades that can cost a large share of the final balance. To see the effect, take the fee off the return: a fund returning 7% with a 1% fee grows like a 6% fund. Compare the 6% and 7% results above to see what that costs over time.

Compounding on debt

Compounding works against you when you borrow. A $5,000 credit card balance at 22% APR, compounded monthly with nothing paid, would grow to about $14,872 in five years. Paying down high-rate debt is a guaranteed return equal to its interest rate, better than most investments. Our credit card payoff calculator shows how long a balance takes to clear.

Which rate to use

• Savings account or CD: the APY the bank quotes. It can change on a savings account; a CD’s is fixed for the term.
• Bonds or bond funds: roughly the fund’s current yield, which its provider publishes.
• Stock index funds: many planners use 6% to 7% a year over long periods, before inflation. Single years range from large gains to falls of a third or more.

Using the calculator well

• Use the today’s-dollars figure for anything more than a few years away.
• Try a cautious rate as well as a hopeful one.
• Open the yearly table to see when interest overtakes your deposits.
• Copy the link to save your figures, and come back each year to compare.

Common mistakes

• Comparing accounts by rate instead of APY.
• Ignoring inflation when judging a long-term balance.
• Leaving savings in an account paying close to nothing.
• Assuming investment returns arrive smoothly every year.
• Withdrawing early and restarting the snowball from a smaller base.

A lump sum or monthly deposits

Money invested sooner has longer to compound. $24,000 invested today at 7% grows to about $48,232 in 10 years. The same $24,000 paid in as $200 a month over those 10 years grows to about $34,617, because most of the deposits are invested for only a few years.

That doesn’t mean you should wait until you have a lump sum. Most people save from each paycheck, and regular deposits are how balances get built. It does mean that money you already have, such as a bonus or an inheritance, starts working the day it goes in.

Saving for a child

Small amounts add up over a childhood. $100 a month from birth to 18 at 6% a year grows to about $38,735, of which $21,600 is your deposits and the rest is growth. For college costs, a 529 plan lets that growth come out tax-free when it is spent on qualified education.

Withdrawals reset the snowball

Taking money out doesn’t just reduce today’s balance; it removes all the growth that money would have earned. $50,000 left for 30 years at 7% grows to about $405,825. Take $10,000 out at the start and the remaining $40,000 grows to about $324,660, so the $10,000 withdrawal costs about $81,000 of future money.

Letting compounding work tax-free

Retirement accounts let compounding run without a yearly tax bill. In a 401(k) or traditional IRA, tax is deferred until you withdraw; in a Roth IRA or Roth 401(k), qualified withdrawals are tax-free. A health savings account can be tax-free on the way in, while invested and on the way out for medical costs. For money you may need within a few years, a high-yield savings account or CD is the safer home, even though its interest is taxed each year.

Savings accounts or investing

Both compound, but they do different jobs. A savings account or CD pays a known rate, can’t fall in value and, at an insured bank, is protected up to the FDIC limit. That makes it right for an emergency fund and for goals within a few years. Its weakness is that, after tax and inflation, its real return is often close to zero.

Investments such as stock index funds have historically compounded much faster over long periods, but they can lose a third or more of their value in a bad year and take years to recover. That makes them better suited to goals ten or more years away, such as retirement, where there is time to ride out the falls. Many people hold both: cash for the near term and investments for the long term. Use the calculator twice, once with a savings rate and once with a cautious investment return, to see the difference for your own goal.

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