Compound Interest Calculator: See How Your Savings Grow

How small, regular contributions grow into a large sum over time

Compound interest is when you earn a return both on the money you put in and on the returns you have already earned. The calculator shows how monthly contributions, returns and time make your savings grow year by year.

Compound interest is when you earn a return both on the money you put in and on the returns you have already earned. Your gains stay invested and earn their own return, so your savings grow faster the longer you leave them.

Calculate compound interest on your savings

The calculator shows what your savings grow to, how much you have paid in yourself and how much comes from returns. Change the starting amount, monthly contribution, rate of return and number of years to see the effect.

How compound interest is calculated

Interest is added once a year. For a one-off lump sum, the final value is:

final value = starting amount × (1 + return)^years

If you add money every month, the calculator uses one combined yearly contribution, the monthly amount times twelve. That amount is added at the start of the year and earns a return for the full year. In other words, the calculator compounds yearly, not monthly. With monthly compounding and the return split over twelve months, the result would be slightly higher, because your returns would start earning returns during the year.

Two examples with a 7% annual return:

• A €10,000 lump sum grows to about €19,672 in 10 years.
• €200 a month for 20 years grows to about €105,276, of which €48,000 is your own contributions.

The second example is worth a closer look: of the final €100,000-plus, less than half is money you put in yourself. Your savings earned the rest for you.

Time is the most important factor

Compound interest is an exponential effect, and most of its power shows up at the end. With €200 a month and a 7% return, the first €10,000 takes almost four years, while the last €10,000 on the way to €100,000 takes just over a year.

That is also why ten years of saving in your twenties often beats twenty years of saving starting at fifty. The one thing you cannot catch up on later is time.

• A higher contribution has the biggest effect early on, when your savings are small.
• A higher return has the biggest effect at the end, when your savings are large.
• More years amplify both, and they are the one thing money cannot buy.

To see how long it takes to reach a specific amount, use the first million calculator. If you have a goal and a deadline instead, the savings goal calculator works the other way around and shows how much you need to set aside each month.

Fees eat into compound interest

The effect also works in reverse. An annual fee is taken from your whole balance every year, and money that went to fees in year one would otherwise have earned a return in every year that followed. The difference between a fund that costs 0.2% a year and one that costs 1.2% looks small over one year but becomes large over thirty. You can run the numbers in the fund fee calculator.

The same goes for inflation: it erodes your purchasing power while compound interest builds up your savings. Savings that grow 5% a year while inflation is 2% give you about 2.9% in real growth. You can see what inflation does to a future amount in the future purchasing power calculator.

Debt works exactly the same way, just in the other direction: interest on an unpaid debt also compounds year after year. That is why it rarely pays to put off paying down expensive debt, and you can work out how long yours will take to pay off in the debt payoff calculator.

Sources

The calculator uses the standard compound interest formula and does not fetch any external market data. The calculation is based entirely on the numbers you enter and is a guide, not a forecast.

Frequently asked questions

What is compound interest?

Compound interest is when you earn a return both on the money you have put in yourself and on the returns you have already earned. Your gains stay invested and earn their own return the following year, which is why your savings grow faster the longer you leave them. People also call it interest on interest.

What is the difference between simple and compound interest?

With simple interest, you earn the same amount every year, calculated on your original deposit only. With compound interest, your returns stay in the account and earn interest themselves, so the amount working for you grows every year. Over long periods, compound interest therefore pays far more than simple interest.

What rate of return is realistic?

Many people assume around 7% a year for a broad, long-term stock portfolio before inflation and taxes, and that is also the calculator's default. The figure is an average over many years. Actual returns swing widely from one year to the next and can be both higher and lower. If you want to be cautious, use 4% to 5%.

Can I calculate compound interest with monthly contributions?

Yes. Enter a monthly contribution in the calculator, and the amount is added to your savings and starts earning a return. The calculator shows both how much you have paid in yourself and how much of the final amount comes from compound interest.

What happens if interest is compounded monthly or daily?

It depends on whether the rate is a nominal rate or an effective annual rate. A nominal rate of 1.25% compounded daily pays 1.25/365% per day, and because that interest earns interest too, the year ends slightly higher. An effective annual rate (often shown as APY or AER) already includes the compounding, so the year lands on exactly 1.25% no matter how often interest is added. The calculator compounds once a year, so enter the effective annual rate.

Does the calculator include taxes and inflation?

The basic calculation is in nominal euros before tax. Depending on where you live, returns on your savings may be taxed, and inflation means that a euro in twenty years buys less than a euro today. To see what inflation does to your purchasing power, use the future purchasing power calculator.

Calculate future purchasing power