How does compound interest work?

Compound interest means you earn returns on your returns. Each period, interest is calculated on your original deposit plus all previously earned interest, so growth accelerates over time — slowly at first, then dramatically in later years.

What rate of return should I assume?

Cash savings accounts typically pay 2-5%. Diversified share portfolios have historically returned around 7-10% per year before inflation over long periods, though returns vary widely year to year. Run the calculation with a conservative and an optimistic rate to see the range.

Does this calculator account for tax or inflation?

No — it shows gross growth. Interest and investment gains are usually taxable, and inflation erodes real value. Pair it with our inflation calculator to see results in today's money, and remember tax-sheltered accounts can change the picture significantly.

The Eighth Wonder

Compound Interest Calculator

Watch small, regular contributions snowball. Model your savings or investment growth over decades, in your own currency.

Your plan

Currency

Starting amount

Monthly deposit

Annual return (%)

Savings accounts: ~2–5%. Long-run diversified shares: ~7–10% before inflation.

Time Horizon (Years)

20 Years

Compounding

Where you end up

Final balance

$271,000

You put in

$130,000

Growth earned

$141,000

Growth over time

Balance by year

Contributions Compound growth

The Long Game

Why time beats timing

In compound growth, the biggest gains arrive in the final years. The earlier you start, the more of those explosive late years you capture.

The rule of 72

Divide 72 by your annual return to estimate how many years your money takes to double. At 7%, that's roughly every 10 years — so a 30-year horizon means about three doublings, turning one dollar into eight.

Mind tax and inflation

The figures here are gross. Interest and gains are usually taxed, and inflation eats purchasing power — at 3% inflation, money halves in real value about every 24 years. Tax-advantaged accounts (super, 401(k), ISAs) and returns above inflation are what create real wealth. Check the inflation calculator to see your result in today's money.