What is compound interest?
Compound interest is interest earned on both your original money and the interest it has already earned. Over time this "interest on interest" snowballs, which is why starting early is so powerful โ often called the eighth wonder of the world.
The formula
For a starting amount with regular monthly contributions: FV = P(1+i)แดบ + PMT ร ((1+i)แดบ โ 1) รท i, where i is the monthly rate and N is the number of months.
Compound growth tables
Interest compounding monthly, as the calculator does. Both tables are in any currency, and scale directly โ for 50,000, multiply the first table by 5.
A one-off 10,000
| Years | 4% | 5% | 6% | 7% | 8% | 10% |
|---|---|---|---|---|---|---|
| 5 | 12,210 | 12,834 | 13,489 | 14,176 | 14,898 | 16,453 |
| 10 | 14,908 | 16,470 | 18,194 | 20,097 | 22,196 | 27,070 |
| 15 | 18,203 | 21,137 | 24,541 | 28,489 | 33,069 | 44,539 |
| 20 | 22,226 | 27,126 | 33,102 | 40,387 | 49,268 | 73,281 |
| 25 | 27,138 | 34,813 | 44,650 | 57,254 | 73,402 | 120,569 |
| 30 | 33,135 | 44,677 | 60,226 | 81,165 | 109,357 | 198,374 |
Saving 100 a month
| Years | 4% | 5% | 6% | 7% | 8% | 10% |
|---|---|---|---|---|---|---|
| 5 | 6,630 | 6,801 | 6,977 | 7,159 | 7,348 | 7,744 |
| 10 | 14,725 | 15,528 | 16,388 | 17,308 | 18,295 | 20,484 |
| 15 | 24,609 | 26,729 | 29,082 | 31,696 | 34,604 | 41,447 |
| 20 | 36,677 | 41,103 | 46,204 | 52,093 | 58,902 | 75,937 |
| 25 | 51,413 | 59,551 | 69,299 | 81,007 | 95,103 | 132,683 |
| 30 | 69,405 | 83,226 | 100,452 | 121,997 | 149,036 | 226,049 |
Why time beats amount
Because growth compounds, an extra 10 years often adds more to your final balance than doubling your monthly contribution. Drag the "years" slider and watch the interest-earned share grow far faster than what you put in.
How much will 10,000 grow to in 10 years?
About 20,097 at 7% a year compounded monthly, or 16,470 at 5%. The higher the rate, the faster the gap widens over time.
How much will I have if I save 100 a month for 20 years?
You put in 24,000. At 7% that grows to about 52,093 โ more than double what you contributed โ and at 5%, about 41,103.
How long does it take money to double?
Divide 72 by the annual rate โ the "rule of 72". At 6% money doubles in about 12 years; at 8%, about 9 years. At 7% compounded monthly, 10,000 becomes 20,097 after 10 years, just over double.
What return rate should I use?
Historically, broad stock markets have averaged roughly 7% per year after inflation over the long term, but returns vary and aren't guaranteed.
Does this account for inflation or tax?
No โ it shows nominal growth. Real spending power will be lower after inflation, and gains may be taxable.