ClearCalcWhat is compound interest?
With simple interest, you earn interest only on the money you put in. With compound interest, the interest you've already earned is added to your balance and starts earning interest too. Over short periods the difference is small; over 20 or 30 years it often becomes larger than everything you contributed, which you can see in the orange part of the chart.
The formula
For a single deposit, the future value is:
where P is the starting amount, r the annual rate as a decimal, n the number of compounding periods per year and t the number of years. With monthly contributions, this calculator adds each deposit at the end of the month and lets it compound from then on.
The rule of 72
A quick mental shortcut: divide 72 by your annual return to estimate how many years it takes to double your money. At 6% that's about 12 years; at 9%, about 8 years.
Three things that matter most
- Time. Starting 10 years earlier often matters more than contributing twice as much.
- Consistency. Regular monthly deposits, even small ones, add up because each one gets years to compound.
- Fees and inflation. A 1% yearly fee or 3% inflation takes a large share of long-term growth. Use the inflation field to see your result in today's buying power.