Finance & Tax
Compound Interest Calculator
Project savings growth with compounding and monthly deposits
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- No Signup
- Calculated in your browser
Calculation mode
Final value
Total contributed
Growth from compounding
Effective annual rate (APY)
How does it work?
Compound interest is interest paid on both the original principal and on previously earned interest. Over long horizons it produces dramatically different outcomes than simple interest — Einstein reportedly called it 'the eighth wonder of the world.'
Core formula
Given a principal P, an annual rate r, the number of compounding periods per year n, and a time horizon of t years:
FV = P × (1 + r/n)^(n × t)
With monthly contributions
When you add a fixed monthly contribution PMT (end of each month), the future value also includes an annuity component:
FV_contributions = PMT × ((1 + r_m)^months − 1) / r_m, where r_m is the equivalent monthly rate
Worked example
Save 1,000 SAR upfront and add 500 SAR monthly for 20 years at 8% annual return, compounded monthly:
- Total contributed = 1,000 + 500 × 240 = 121,000 SAR
- Future value ≈ 299,500 SAR
- Growth from compounding ≈ 178,500 SAR
- Effective annual rate (APY) ≈ 8.30%
Reverse mode: how much do I need today?
Switch to reverse mode to enter a target future value (e.g. 'I want 1,000,000 SAR for retirement in 30 years') and the calculator solves for the upfront principal you need today, given your monthly contribution and expected return.
Practical tips
- Start early — 10 extra years can double the final amount.
- Monthly contributions compound too; even small amounts add up over decades.
- Compounding frequency matters less than you'd think for typical rates; monthly is a good default.
- Effective annual rate (APY) is the rate that makes a single annual compounding produce the same outcome — use it to compare offers across different compounding frequencies.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original principal. Compound interest is paid on the principal AND any previously earned interest. Over long periods, compound interest produces dramatically higher returns.
Why does compounding frequency matter?
More frequent compounding (e.g. daily vs annually) produces slightly higher returns because earned interest starts earning interest sooner. The effect is small for typical rates but becomes meaningful at higher rates.
What is the effective annual rate (APY)?
APY is the rate that, when compounded once a year, produces the same outcome as the nominal rate compounded more frequently. It's the apples-to-apples figure for comparing offers.
How does the reverse mode work?
Enter a target future value, your monthly contribution, expected return, and time horizon. The calculator solves backwards for the upfront principal you need today to hit the goal.
Does this account for inflation?
No — the calculator uses nominal rates. To get a real-terms answer, subtract expected inflation from your rate (e.g. 8% return − 3% inflation = 5% real rate).
Are these projections guaranteed?
No — they're projections based on the rate you enter. Actual investment returns vary year-to-year. Treat compound interest projections as planning tools, not guarantees.
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