How compound interest grows your money
Compound interest means you earn returns not only on the money you originally put in, but also on the interest that money has already earned. Each time interest is added to your balance, the next round of interest is calculated on that larger amount — so growth accelerates over time instead of staying flat like it would with simple interest. The longer your money stays invested, the more dramatic this snowball effect becomes.
What affects your final balance
- Interest rate. Even small differences compound significantly over long periods.
- Time horizon. Starting early matters more than almost any other factor — an extra decade of growth often outweighs a much larger rate difference.
- Compounding frequency. Interest compounded monthly grows slightly faster than the same annual rate compounded yearly, because interest starts earning interest sooner.
- Regular contributions. Adding a fixed amount every month, on top of your starting balance, meaningfully boosts the final total — this calculator's "monthly contribution" field shows exactly how much.
Frequently asked questions
What's the difference between compound and simple interest?
Simple interest is calculated only on the original principal, so it grows in a straight line. Compound interest is calculated on the principal plus any interest already earned, so the balance grows faster the longer it compounds.
What does "compounds per year" mean?
It's how often interest is calculated and added to your balance — annually, quarterly, monthly, or daily. More frequent compounding produces a slightly higher return for the same stated annual rate.
How much do monthly contributions really matter?
A lot, especially over long periods — consistent contributions are often responsible for more of your final balance than the starting amount itself, because each contribution gets its own runway to compound.
This calculator gives an estimate based on a constant rate of return. Real investments fluctuate, and returns aren't guaranteed — this is a planning tool, not investment advice.