How to calculate compound interest
Compound interest means you earn returns on your previous returns. The final value depends on your starting amount, regular contributions, the rate and — most powerfully — the number of years.
The rule
Future value = P × (1 + r)^n + regular contribution × (((1 + r)^n − 1) ÷ r)
Do it automatically — Compound interest & investment growthStep by step
- 1Take the starting amount and the annual rate of return.
- 2Add your regular contribution and how often it is made.
- 3Compound over the number of years, applying growth to the whole balance each period.
- 4Subtract inflation from the rate if you want the answer in today's money.
What trips people up
- • Charges compound too — a 1% fee is far more damaging over 30 years than it looks.
- • Average returns are not smooth; sequence of returns matters when drawing money out.
Common questions
What return should I assume?
Long-run global equity averages are often modelled at 5–7% nominal, less after fees and inflation.
Does compounding frequency matter?
A little — monthly compounding beats annual, but the rate and time horizon matter far more.
Skip the maths
Model contributions, interest / return rate and years — see the final value.
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