Compound interest is interest that earns interest. Because each period's growth is added to the balance, later returns are calculated on earlier gains, and the effect accelerates the longer you stay invested. This calculator projects the future value of a lump sum plus regular monthly deposits at a chosen rate and compounding frequency.
What this calculator does
Grows an initial principal over a set number of years.
Adds a fixed monthly deposit to the balance.
Supports monthly, quarterly or yearly compounding.
Splits the result into total contributions and interest earned.
Here P is the starting principal, PMT the deposit per period, r the annual rate as a decimal, n the number of compounding periods per year and t the number of years. The first term grows the lump sum; the second values the stream of deposits at the same rate.
Compounding frequency and the rule of 72
More frequent compounding earns slightly more for the same nominal rate, because interest starts working sooner. A quick mental estimate is the rule of 72: divide 72 by the annual percentage rate to approximate the years needed to double. At 6% that is 72 ÷ 6 = 12 years.
A worked example
Start with $10,000, deposit $500 a month at 6% for 10 years with monthly compounding. The monthly rate is 0.06 ÷ 12 = 0.005 and there are 120 periods, so (1.005)^120 ≈ 1.8194. The lump sum grows to about $18,194, and the deposits add roughly $81,940, for a future value near $100,134. Total contributions are $70,000, so about $30,134 is interest — close to a third of the balance.
Item
Amount
Initial principal
$10,000
Monthly deposits (120 × $500)
$60,000
Interest earned
≈ $30,134
Future value
≈ $100,134
Tips and assumptions
The model assumes a constant rate and that deposits are made at the end of each compounding period. Real returns vary from year to year, tax and fees are not included, and inflation reduces the purchasing power of the final balance. Use the result as a comparison tool rather than a guarantee of future performance.
Compound interest is interest earned on both your original money and on the interest already added. Over time this makes savings grow faster than simple interest.
Does compounding frequency matter?
Yes. The more often interest compounds, the more you earn for the same nominal rate, because interest starts earning interest sooner.
How are monthly deposits handled?
Monthly deposits are grouped into each compounding period and added at the end of it. With yearly compounding, twelve monthly deposits are combined before interest is applied.