How compound interest works
Compound interest means you earn interest on your original money and on the interest it already earned. Left alone for years, that "interest on interest" becomes the biggest part of the balance. This is why starting early matters more than most people expect.
The formula
For a single deposit: A = P × (1 + r/n)n×t. A is the final amount, P the starting amount, r the annual rate as a decimal, n how many times a year interest is added and t the number of years. Regular deposits are layered on top, which is what this calculator does month by month so you can see every year.
A worked example
Put in 10,000 today and add 200 every month at 7% a year, compounded monthly, for 10 years (deposits at month end). You contribute 34,000 in total and end with about 54,714. The difference, around 20,714, is interest. Try changing the years to 20 and watch how much of the growth comes from the later years.
What moves the result most
- Time. Doubling the years does far more than doubling the contribution.
- The rate. A higher rate helps, but chasing a high advertised rate often means higher risk.
- Regular contributions. Steady deposits beat waiting for a "perfect" lump sum.
- Costs and tax. Fees compound too, in the wrong direction, so keep them low.
Use it for real decisions
Compare saving 100 a month with 200 a month, or ten years with twenty. Test a cautious rate and an optimistic one to see the range. If you are borrowing instead of saving, the maths works against you: see flat vs reducing interest rates and the EMI calculator.
New to the idea? Read how compound interest works, build a safety net with our emergency fund guide and learn how to start investing with little money. This tool is for education, not financial advice.