Year-by-year growth
| Year | Contributed | Interest | Balance |
|---|
How compound interest is calculated
When contribution and compounding frequencies differ, the calculator steps month by month (or day by day) applying growth and adding contributions on their due dates, which matches how a real account behaves.
Worked example
10,000 start, 500 per month, 7% compounded monthly for 20 years: lump sum grows to 40,387; contributions of 120,000 grow to 260,463. Final balance ≈ 300,850, of which 170,850 is growth.
Frequently asked questions
What is the compound interest formula?
A = P × (1 + r/n)^(n×t), where P is the starting amount, r the annual rate as a decimal, n the number of compounding periods per year and t the number of years. With regular contributions C per period, add C × ((1 + r/n)^(n×t) − 1) ÷ (r/n).
What is the difference between compound and simple interest?
Simple interest is earned only on the original principal. Compound interest is earned on the principal plus previously earned interest, so growth accelerates over time. 10,000 at 6% for 20 years: simple = 22,000; compounded annually = 32,071.
How often should interest compound?
More frequent compounding earns slightly more. 10,000 at 6% for 10 years: annually 17,908; monthly 18,194; daily 18,220. The difference between monthly and daily is small; the difference between simple and compound is large.
What is the rule of 72?
Divide 72 by the annual rate to estimate how many years it takes to double your money. At 8% that is about 9 years; at 6% about 12 years.
Does this calculator account for inflation or tax?
Not directly. To see real (inflation-adjusted) growth, subtract expected inflation from the rate, e.g. 7% nominal − 3% inflation ≈ 4% real. Tax on interest or gains depends on your country; GCC residents generally pay none.
Is compound interest halal?
Interest (riba) from conventional savings is not permissible in Islamic finance, but the same compounding maths applies to profit rates on Islamic savings accounts, sukuk and reinvested equity returns. Use the calculator with your expected profit or return rate.
Are contributions made at the start or end of each period?
End of each period (ordinary annuity), which matches most savings plans. Contributing at the start would increase the result by one period's growth.