Compound interest is the engine behind long-term wealth: you earn interest on your interest. Enter a starting amount, an optional monthly contribution, an annual rate and a time horizon to see your future balance, how much of it is interest, and a year-by-year growth chart.
The Compound Interest Formula
Where P is your starting amount, PMT the monthly contribution, i the monthly rate and n the number of months. The first part grows your starting balance; the second grows your stream of contributions.
Worked Example
Start with $10,000, add $200/month at 7% for 20 years: you contribute $58,000 in total, but end with roughly $144,600 — about $86,600 of it pure interest. Stretch it to 30 years and the interest earned dwarfs everything you put in.
The Real Lesson: Time Beats Timing
Doubling your time horizon does far more than doubling your contribution, because compounding is exponential. Starting ten years earlier — even with half the money — usually wins. That’s why the standard advice never changes: start now, automate contributions, and leave it alone.
Frequently Asked Questions
What is compound interest?
Interest earned on both your original money and on previously earned interest. Each period’s growth becomes part of the base for the next period’s growth.
How often is interest compounded here?
Monthly — the most common convention for savings accounts and investment projections. More frequent compounding produces slightly higher results.
Why do small monthly contributions matter so much?
Each contribution starts compounding the day it’s added. Over decades, steady contributions often earn more interest than the original lump sum.