What is compound interest?
Compound interest means your money earns returns, and then those returns earn returns as well. Over time that snowball effect can materially increase the final balance.
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Compound Interest Calculator
Project how savings and investments can grow over time with compound returns, regular contributions, and optional inflation adjustment.
Project future value, contributions, and compound growth with optional inflation adjustment.
Growth table
Review how contributions and compound growth build balance year by year.
| Year | Balance | Contributions | Interest | Real Balance |
|---|---|---|---|---|
| 1 | $16,919 | $16,000 | $919 | — |
| 2 | $24,339 | $22,000 | $2,339 | — |
| 3 | $32,294 | $28,000 | $4,294 | — |
| 4 | $40,825 | $34,000 | $6,825 | — |
| 5 | $49,973 | $40,000 | $9,973 | — |
| 6 | $59,782 | $46,000 | $13,782 | — |
| 7 | $70,299 | $52,000 | $18,299 | — |
| 8 | $81,578 | $58,000 | $23,578 | — |
| 9 | $93,671 | $64,000 | $29,671 | — |
| 10 | $106,639 | $70,000 | $36,639 | — |
How compound growth works
Compound growth happens when returns are added to the balance and start generating additional returns themselves. The longer the time horizon, the more powerful that effect becomes.
Regular contributions strengthen the result even more because new capital keeps entering the portfolio and benefiting from future compounding periods.
Why inflation matters
A future balance can look large in nominal terms but still lose purchasing power if inflation stays high. That is why the inflation-adjusted figure is useful when planning long-term savings goals.
What to compare
- Higher contribution amounts versus longer time horizons
- Monthly compounding versus annual compounding
- Nominal growth versus inflation-adjusted real value
Frequently asked questions
What is the difference between principal and contributions?
Principal is the starting amount already invested. Contributions are the extra amounts you add regularly over time.
Why does compounding frequency matter?
More frequent compounding applies returns to the balance more often, which slightly increases growth compared with less frequent compounding at the same annual rate.
What does inflation-adjusted value mean?
It is the estimated future balance expressed in today’s purchasing power. It helps show the real value of your money after inflation.
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