How the balance grows
Compound interest means the interest you earn starts earning interest too. The calculator follows the balance month by month:
- If deposits are made at the start of the period, the deposit is added.
- The balance grows by one month’s interest.
- If deposits are made at the end of the period, the deposit is added.
The monthly growth rate comes from the yearly rate and how often it’s compounded:
monthly rate = (1 + r ÷ m)m ÷ 12 − 1
- r
- the yearly interest rate or return
- m
- how many times a year interest is compounded: 1, 2, 4, 12 or 365
With monthly compounding, that’s the yearly rate ÷ 12. The balance isn’t rounded along the way. The results keep what you paid in and what it earned apart: interest earned = final balance − starting amount − deposits, so the three figures always add up to the balance shown.
Worked example
The calculator’s starting values: $10,000 now, $200 at the end of every month, 6% a year compounded monthly, for 20 years.
- Paid in: $10,000 + 240 × $200 = $58,000.00
- Interest earned: $67,510.22
- Final balance: $125,510.22
In the first year the account earns $683.89 of interest. In the twentieth year it earns $7,215.26, because interest is being earned on all the interest that came before.
What makes the biggest difference
With the same $10,000 and $200 a month:
| Change | Final balance | Interest earned |
|---|---|---|
| 6% for 20 years (the example) | $125,510.22 | $67,510.22 |
| 4% instead of 6% | $95,580.75 | $37,580.75 |
| 8% instead of 6% | $167,072.11 | $109,072.11 |
| 10 years instead of 20 | $50,969.84 | $16,969.84 |
| 30 years instead of 20 | $261,128.76 | $179,128.76 |
Time and rate matter most. Going from 20 to 30 years adds $24,000 of deposits but $111,618.54 more interest.
How often interest is compounded matters much less. $10,000 at 6% for 10 years becomes $17,908.48 compounded once a year, $18,193.97 compounded monthly and $18,220.29 compounded daily.
Depositing at the start of each month rather than the end gives each deposit one more month of growth: $125,972.26 instead of $125,510.22 in the example.
Raising your deposits each year
If the $200 goes up 3% at the start of each year, you pay in $64,488.72 of deposits over 20 years instead of $48,000, and the balance reaches $150,242.57. Of that, $75,753.85 is interest.
What it’s worth in today’s money
Prices rise over time, so a future balance buys less than the same amount today. With inflation at 2.5% a year, the example’s $125,510.22 in 20 years would buy about what $76,595.24 buys now. The balance itself doesn’t change; this only helps you judge what it’s worth. The value is the balance ÷ (1 + inflation)years.
Interest rate and APY
Savings accounts are often advertised with an APY (annual percentage yield), which already includes the effect of compounding. If you have an APY, enter it as the rate and choose “Once a year”. If you have a rate with a stated compounding frequency, enter both. The calculator shows the effective yearly rate for what you enter: 6% compounded monthly is an APY of 6.168%.
Assumptions and limitations
- The rate stays the same for the whole period. Investment returns vary from year to year and can be negative. A steady rate is a simplification, not a forecast.
- Taxes, account fees and fund charges aren’t included. They reduce the growth you actually get.
- Deposits are made in full and on time, with no withdrawals.
- Each deposit is rounded to the cent. The balance isn’t, and figures are rounded only for display.
- The results are projections for planning, not a promise of what any account or investment will pay.
Questions
How is this different from the Savings Goal Calculator?
This calculator starts from what you put in and shows where it ends up. The Savings Goal Calculator works the other way: you enter the amount you want, and it works out what to save each month or how long it will take.
Can I use it for investments?
Yes, with a yearly return instead of an interest rate. The result shows what a steady return would produce. Real returns rise and fall, so treat it as one possible outcome rather than an expected one.
What happens if I stop depositing?
Set the regular deposit to 0 to see what your current balance grows to on its own.