Compound Interest Calculator
Use our compound interest calculator to see how your savings can grow over time. Calculate returns with different contribution amounts, interest rates, and compounding frequencies.
How to calculate your interest
To calculate how much your savings could grow with compound interest:
- Enter the amount you have currently in savings (the initial deposit)
- Select how long you plan to save for
- Enter your expected rate of return
- Add any contributions you plan to make (weekly, bi-weekly, monthly or annually)
- Choose how often interest compounds (daily, monthly, quarterly or annually)
The calculator will show you your final balance, total contributions made and interest earned.
What is compound interest?
Compound interest is when you earn interest not only on your initial deposit but also on the interest you've already earned. Think of it as your money making money on your money.
For example, let’s say deposit $1,000 at a 5% annual percentage yield (APY). After the first year, you'd earn $50 in interest (5% of $1,000). In the second year, you earn interest on $1,050 (your initial $1,000 plus $50 in interest). This cycle will continue, accelerating your money's growth over time.
Formula for calculating the final value of an investment that’s compounded:
Amount = P ( 1 + r/n ) nt
- P = initial investment;
- r = interest rate
- t = compounded periods per year
- n = number of years
Compounding frequencies
The more frequently interest compounds, the faster your money grows. However, when comparing accounts, focus on the APY rather than the interest rate, as APY already accounts for compounding frequency.
Tips to maximize compound interest
You can deposit money to save for long-term goals – like saving for retirement – or relatively shorter-term goals, such as a vacation. Start saving early to harness time's power. The longer your money has to compound, the more it can grow.
You’ll also want to choose an account with competitive rates. The difference between a 0.01% APY traditional savings account and a 4.50% APY high-yield savings account can mean thousands of dollars in additional earnings over time.
Make regular contributions to accelerate your savings. Even small monthly deposits can significantly impact your final balance. Let’s say you deposit $5,000 into an account earning 5% APY. After 10 years, your balance will be $8,235.05 (assuming monthly compounding). But if you contributed just $100 additionally each month, your final balance would be $23,763.28.
Lastly, automating your savings can help you reach your financial goals. Automating your savings means money moves automatically into a savings account – either through a split direct deposit or through a recurring transfer from your checking to your savings account.
Where to put your money to get the best return
You can deposit money to save for long-term goals – buying a house in 10 years – or relatively shorter-term goals, such as a wedding in two years.
$1,000 at 0.01 percent APY will only be $1,001 at the end of 10 years. But $1,000 at 5 percent APY will be $1,629 after 10 years. And if you added just $50 a month, you’d have $9,411 saved up – at 5 percent APY after 10 years. And if you added just $50 a month, you’d have $2,258 saved up. There are two lessons here: add money if you can and make sure you’re earning a competitive yield.
Automating your savings can help you reach your financial goals without having to remember to save. Automating your savings means money moves automatically into a savings account – either through a split direct deposit or through a recurring transfer from your checking to your savings account.