Savings and investing guide
How to Calculate Compound Interest
Compound interest means growth is calculated on an initial balance and on accumulated growth. This calculator models periodic deposits at a constant assumed rate.
What compound interest means
Compound interest is interest calculated on the original balance and on interest already credited to the account. The balance can grow faster than under simple interest when the rate stays positive and interest remains invested. The result depends on the account’s rate, compounding rules, deposits, fees, and withdrawals.
Formula for a lump sum
For a single deposit with a constant nominal annual rate r compounded m times per year for t years, future value = P(1 + r/m)^(mt). P is the initial principal. For example, $1,000 at a hypothetical 5% rate compounded annually for one year becomes $1,050 before fees and taxes.
How regular deposits change the model
Recurring deposits add another stream of cash flows. With equal deposits at each period and a constant rate, the future value of the deposits uses an annuity formula; a period-by-period schedule is more flexible when deposit amounts or dates vary. Deposits made at the beginning of a period have an extra period to earn interest compared with deposits at period-end.
What a projection can and cannot tell you
A constant-rate projection is a mathematical scenario, not a promise. Savings rates can change, and investment returns can vary or be negative. Fees, taxes, inflation, withdrawals, and contribution timing affect the amount available to you. Compare several reasonable assumptions and check what the calculator includes before using its output for a plan.
Frequently asked questions
Does compounding guarantee investment growth?
No. A constant-rate projection is only a scenario; investment returns can vary and may be negative.
Are fees and taxes included?
Not unless the inputs explicitly model them. Review account fees and tax treatment separately.
Sources and further reading
Try the calculator
Use the Compound Interest Calculator to explore your own numbers with the assumptions shown in the tool.
Related guides
Educational content only; not individualized financial, tax, or legal advice.