Interest Calculator

The compound interest formula

Compound interest means each period's interest joins the balance and then earns interest itself. The formula is the starting amount multiplied by 1 plus the periodic rate, raised to the number of periods, and with annual compounding the periodic rate is just the annual rate. Take the default example, 5,000 dollars at 5 percent for 10 years compounded yearly. The balance is multiplied by 1.05 ten times over and reaches 8,144.47 dollars, for 3,144.47 dollars of interest and a growth multiplier of 1.63. The first year earns 250 dollars, while the tenth earns 387.85 dollars at the same rate, because the base has grown underneath it.

Compound versus simple interest

Simple interest never reinvests, so the same 5,000 dollars at 5 percent earns a flat 250 dollars a year and ends at 7,500 dollars after a decade. Compounding adds 644.47 dollars over that stretch, and the gap widens fast as time and rate climb. Frequency matters far less than people expect. Moving from yearly to daily compounding on this example adds under 99 dollars.

The table makes the priority clear. A better rate or a longer horizon moves the needle far more than a tighter compounding schedule.

Adding monthly contributions

Regular deposits shift the picture more than any compounding tweak. The calculator treats them as an annuity, where each deposit starts compounding the moment it lands, using the future value of an annuity per period. Keep the default example and add 100 dollars a month. You put in 12,000 dollars across the decade, and the final balance reaches 23,237.94 dollars. The interest line reads 6,237.94 dollars, everything above the 17,000 dollars you actually contributed. With simple interest, each deposit earns the flat rate only for the time it stays invested, roughly half the duration on average.

Reading the results

Three outputs sum up the projection. The final balance is the headline number. Interest earned strips out your own money, both the starting amount and every deposit, and shows what the rate really did for you. The growth multiplier divides the final balance by the total you invested, so a multiplier of 1.37 means every dollar you put in became 1.37 dollars. The year by year table samples years 1, 5 and 10 plus your own horizon, which makes it easy to spot when compounding starts pulling away from the straight line.