Compound Interest
Understanding compound growth
This calculator estimates the future value of an initial balance plus optional monthly contributions. Select the nominal annual rate, time period, and number of compounding periods used for the starting balance.
Formula and method
Principal growth: A = P(1 + r/n)^(nt). Monthly contributions use the future-value-of-an-annuity formula and assume deposits occur at the end of each month.
Worked example
$10,000 earning 6% for 10 years with no deposits grows to about $18,194 when compounded monthly.
How to interpret the result
Separate the projected ending balance into money deposited and estimated growth. Early deposits have more time to compound, so extending the time horizon can matter as much as increasing the rate. The rate is treated as a constant nominal annual rate; it should not be read as a promise of investment performance or a guaranteed bank yield.
Important limitations
- Returns are assumed constant and are not guaranteed.
- Taxes, fees and inflation are not included.
Common questions
Does compounding frequency affect monthly contributions?
The starting principal uses the selected compounding frequency. Monthly contributions are modeled as end-of-month deposits, which keeps their timing consistent even when the principal compounds on another schedule.
Is an annual rate the same as APY?
Not always. APY already includes the effect of compounding, while a nominal annual rate does not. Entering an APY as though it were nominal can slightly overstate the result.
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Method and examples reviewed September 8, 2026.