What is compound interest?

Interest calculated on the original amount plus all previously earned interest, so growth accelerates over time. Simple interest pays the same amount every year on the original sum; compound interest pays on a growing base. Over long periods the difference is the entire argument for investing early.

How often should interest compound?

More frequently is slightly better, but the effect is small. At 7%, annual compounding gives an effective rate of 7% while daily gives about 7.25%. The rate itself and the fees charged matter far more, so do not choose a product on compounding frequency alone.

Is a 7% return realistic?

Broad sharemarket indices have historically returned roughly 9-10% a year before inflation over multi-decade periods, or around 7% after it. Any particular decade can look nothing like that. Savings accounts and term deposits return far less, and conservative projections are safer than optimistic ones because the gap is discovered years later.

What is the Rule of 72?

Divide 72 by the annual return rate to estimate the years it takes money to double. At 8% that is nine years; at 12%, six. It is accurate enough for mental arithmetic between about 6% and 15%, and it works equally well for estimating how fast a debt grows.

Should I invest a lump sum or contribute monthly?

If you have the lump sum, investing it immediately has historically beaten spreading it out about two thirds of the time, because markets rise more often than they fall. Monthly contributions are how most people invest anyway, and they remove the need to have an opinion about timing.

Does this account for inflation or tax?

Neither. The result is in future dollars before tax. To think in today's purchasing power, subtract your inflation assumption from the return rate before entering it. A 7% return with 3% inflation becomes 4%. For a taxable account, reduce the return by your expected tax on earnings.

Compound Interest Calculator

Works anywhere

Projects how an investment grows with compound interest and regular contributions at any compounding frequency. $10,000 at 7% for 20 years with $200 a month grows to about $142,000, of which more than half is interest.

Results

Worked example. Edit the values and press Calculate

Future value

$144,573

Total contributions
$58,000
Your starting amount plus every deposit you make.
Interest earned
$86,573
Interest as a share of the final value
59.88%
Growth from the starting amount alone
$40,387
Growth from contributions
$104,185
Effective annual rate
7.23%
The nominal rate after the effect of compounding frequency.
Years for money to double
9.9 years
How long any one deposit takes to double at this rate, before further contributions.

Why use this calculator

Compounding is the one financial force that rewards patience more than income, and it is almost impossible to feel intuitively. The growth is slow enough to be discouraging for years, then accelerates in a way that surprises people who stopped early. Seeing the year-by-year table is what makes the argument, because you can watch the interest column overtake the contributions column at a specific point.

This calculator also handles the detail most tools get wrong: when contributions are monthly but interest compounds at a different frequency, treating the two as the same produces wildly incorrect results at daily or annual compounding.

How to use it

Enter what you have now, what return you expect after fees, and how long the money will be invested.
Choose the compounding frequency that matches the product: savings accounts typically compound monthly or daily, term deposits often semi-annually, and index fund returns are usually quoted annually.
Add your regular monthly contribution, which for most people matters far more than the starting balance. Use a conservative return figure.
Optimistic assumptions make the projection wrong rather than making you richer, and a gap between plan and reality is discovered years later.

What each result means

Future value: The projected balance at the end of the period, in future dollars. Inflation means it buys less than the same figure today.
Total contributions: Everything you put in. Starting amount plus all deposits. Compare it against interest earned to see how much the market did for you.
Interest earned: The part of the final balance that came from returns rather than from your own money.
Interest as a share of the final value: How much of the outcome compounding produced. Over long periods this typically exceeds half.
Growth from the starting amount alone: What your initial investment becomes on its own. It shows why starting early beats starting large.
Growth from contributions: What regular deposits become. For most people this eventually dominates the starting amount.
Effective annual rate: The real annual return once compounding frequency is accounted for. Always slightly above the nominal rate when compounding is more frequent than yearly.
Years for money to double: How long a single deposit takes to double at this rate and compounding frequency. A quick way to compare rates: each extra percentage point shortens it noticeably.

The formula

The lump sum grows as

A = P(1 + r/n)^(nt)

Where P is the principal, r the annual rate, n the compounding periods per year and t the years.

Monthly contributions are accumulated separately using the equivalent monthly rate

iₘ = (1 + r/n)^(n/12) − 1

Giving PMT × [(1 + iₘ)^months − 1] ÷ iₘ.

Converting the rate is what keeps the maths correct when contributions and compounding happen at different frequencies. The effective annual rate is (1 + r/n)^n − 1.

How this number is used in practice

Starting early beats contributing more, and the gap is larger than intuition suggests. Someone investing $200 a month from age 25 to 35 and then stopping usually ends up ahead of someone investing the same amount from 35 to 65, despite contributing a third as much. The first investor's money simply has thirty more years to compound.

The Rule of 72 is the mental shortcut worth carrying: divide 72 by the annual return to get the doubling time. At 7% money doubles roughly every ten years, at 9% every eight. It also works against you. A debt at 18% doubles in four years if left alone.

Compounding frequency matters far less than people expect. Moving from annual to monthly compounding at 7% lifts the effective rate from 7% to about 7.23%. Moving from monthly to daily adds almost nothing. Fees and the return rate itself are where the real differences sit.

Worked examples

$10,000 at 7% compounded monthly for 20 years with $200 a month
Grows to about $142,000. Roughly $58,000 contributed and $84,000 earned.
The same investment run for 30 years instead of 20
Grows to roughly $320,000. An extra decade more than doubles the result.
$5,000 at 10% compounded annually for 20 years, no contributions
Grows to about $33,600. The starting amount alone more than sextuples.

When people use it

Projecting long-term investment or superannuation growth
Comparing savings accounts with different compounding frequencies
Showing the cost of delaying the start of regular investing
Working out what a monthly contribution becomes over a career
Teaching the difference between simple and compound growth

Tips

Start earlier rather than contributing more. Time is the variable that compounds, and it cannot be recovered later.
Use the Rule of 72: divide 72 by your return rate to estimate how long money takes to double.
Compounding frequency barely matters. At 7%, annual versus daily compounding differs by about a quarter of a percentage point.
Use a return after fees. A 1% fee on a 7% return takes roughly a quarter of the final balance over thirty years.
Subtract your inflation assumption from the return rate to see the result in today's purchasing power.
The same maths works against you on debt. A credit card at 20% doubles an untouched balance in under four years.

What it assumes, and where it stops being accurate

A constant return every year. Real markets deliver the same average through a sequence of gains and falls, and the order matters near the end.
Contributions are made at the end of each month and never missed or increased.
No tax on earnings. In a taxable account, returns are reduced each year, which compounds too.
No fees are deducted unless you build them into the return rate yourself.
Results are in future dollars. Inflation is not applied, so the purchasing power is lower than the figure suggests.

Terms used on this page

Compounding: Earning returns on previously earned returns as well as on the original amount.
Effective annual rate: The true annual return once compounding frequency is taken into account.
Future value: What an amount grows to after a period of compounding.
Rule of 72: A mental shortcut: 72 divided by the return rate approximates the years to double.

Questions people ask

What is compound interest?: Interest calculated on the original amount plus all previously earned interest, so growth accelerates over time. Simple interest pays the same amount every year on the original sum; compound interest pays on a growing base. Over long periods the difference is the entire argument for investing early.
How often should interest compound?: More frequently is slightly better, but the effect is small. At 7%, annual compounding gives an effective rate of 7% while daily gives about 7.25%. The rate itself and the fees charged matter far more, so do not choose a product on compounding frequency alone.
Is a 7% return realistic?: Broad sharemarket indices have historically returned roughly 9-10% a year before inflation over multi-decade periods, or around 7% after it. Any particular decade can look nothing like that. Savings accounts and term deposits return far less, and conservative projections are safer than optimistic ones because the gap is discovered years later.
What is the Rule of 72?: Divide 72 by the annual return rate to estimate the years it takes money to double. At 8% that is nine years; at 12%, six. It is accurate enough for mental arithmetic between about 6% and 15%, and it works equally well for estimating how fast a debt grows.
Should I invest a lump sum or contribute monthly?: If you have the lump sum, investing it immediately has historically beaten spreading it out about two thirds of the time, because markets rise more often than they fall. Monthly contributions are how most people invest anyway, and they remove the need to have an opinion about timing.
Does this account for inflation or tax?: Neither. The result is in future dollars before tax. To think in today's purchasing power, subtract your inflation assumption from the return rate before entering it. A 7% return with 3% inflation becomes 4%. For a taxable account, reduce the return by your expected tax on earnings.

Use this with

Compound Interest Calculator answers one part of the question. These pick up where it stops: Savings Goal Calculator, Retirement Savings Calculator, Investment Return Calculator and Simple Interest Calculator.

Where these figures come from

Works anywhereLast reviewed 2026-09·How we build and check calculators

This calculation is jurisdiction-neutral arithmetic. No country-specific rules are applied.

ASIC Moneysmart: how to invest. Independent guidance on returns, risk and fees
Reserve Bank of Australia: indicator lending rates. Published lending and deposit rates

Compound Interest Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.