Compound Interest Calculator

How it works

Compound interest is interest calculated on your whole balance — the original principal plus every dollar of interest already added to it — rather than on the original principal alone. Each time interest is added, the balance it’s calculated on next is a little bigger, so the dollar amount of interest keeps growing even if the rate and the amount you put in stay exactly the same. Left alone for long enough, that snowball effect is what makes compound interest grow so much faster than simple interest.

Compounding frequency is how often that interest actually gets added to the balance — annually, quarterly, monthly or daily. More frequent compounding means each individual addition is smaller (a monthly rate is roughly a twelfth of the annual rate), but interest starts earning its own interest sooner, so more frequent compounding always produces a slightly higher result for the same quoted annual rate. The difference between monthly and daily compounding is usually small; the difference between annual and monthly compounding is more noticeable, especially over many years.

This calculator also handles regular monthly contributions, which a plain compound interest formula can’t do on its own. Instead of using a single formula, it steps through the calculation one compounding period at a time: at the end of each period, it adds interest on the current balance, then adds that period’s share of your monthly contribution, and carries the new total into the next period. Written as a loop:

ratePerPeriod = (annual rate ÷ 100) ÷ compoundsPerYear
contributionPerPeriod = (monthly contribution × 12) ÷ compoundsPerYear

balance = principal
repeat once for each compounding period over the full term:
  balance = balance × (1 + ratePerPeriod) + contributionPerPeriod

Because interest is calculated on the balance before that period’s contribution is added, only contributions already sitting in the account earn interest in a given period — a fresh contribution starts earning interest from the next period onward. Total interest earned is simply the final balance minus everything you put in (your starting principal plus every contribution).

Worked example

Wei, a nurse in Perth, opens a high-interest savings account with $10,000, sets up an automatic transfer of $200 a month, and finds an account paying 5% p.a., compounded monthly. With monthly compounding, each period covers one-twelfth of the year, so the rate applied per period is 5% ÷ 12 ≈ 0.4167%, and her full $200 monthly contribution lands once per period (since contributions are also monthly).

Tracing the first few periods of the loop:

• End of month 1: $10,000 earns one month’s interest (≈$41.67), then $200 is added → $10,241.67
• End of month 2: $10,241.67 earns interest (≈$42.67), then $200 is added → $10,484.34
• End of month 3: $10,484.34 earns interest (≈$43.68), then $200 is added → $10,728.03

The same step repeats for all 120 months (10 years × 12 compounds a year). By the end of year 1 her balance has reached $12,967, and it keeps accelerating as more of the balance is itself past interest. After the full 10 years, Wei’s account holds $47,527 — built from $34,000 she contributed herself ($10,000 principal plus $200 × 120 months) and $13,527 in interest the account earned on top.

Year	Balance	Contributions to date	Interest earned to date
1	$12,967	$12,400	$567
5	$26,435	$22,000	$4,435
10	$47,527	$34,000	$13,527

Notice how the “interest earned to date” column grows faster in later years than in earlier ones, even though Wei’s monthly contribution never changes — that’s compounding at work. By year 10, the $13,527 in interest is worth nearly 40% of the $34,000 Wei actually contributed herself, entirely from the account earning interest on its own past interest.