How compound interest grows your savings

Compound interest is what happens when the returns your money generates start generating returns of their own. Early on it is imperceptible; after twenty or thirty years it is most of what you have. This calculator projects that growth year by year so you can see how much you put in and how much time put in.

Time matters more than the amount

This is the most counter-intuitive result in saving, and two cases you can reproduce right here show it best, both at 6% a year. Saving 200 a month for 30 years means contributing 72,000 of your own money and ending with about 200,900. Saving 400 a month for 20 years means contributing 96,000 and ending with about 184,800.

In the second case you put in 24,000 more and end up with 16,000 less. The difference is not effort, it is the extra ten years the earliest contributions had to compound. That is why the useful question is usually not how much can I save, but when can I start.

What compounding frequency actually changes

Compounding is the moment the interest earned is added to the balance and starts earning interest itself. The more often it happens, the more you grow — but the effect is smaller than people assume: 10,000 at 6% over 20 years becomes 32,071 compounded annually and 33,198 compounded daily. A 3.5% difference. It is real, but the rate and the term matter far more: do not switch products over this alone.

How to read the table

Each row is a year. Starting balance is what you begin that year with; total contributions is everything you have put in by the end of that year, initial capital included; interest earned is what the money returned during that year alone; ending balance is what you hold when it closes. Compare the first row with the last: the ratio between what you contributed and what you earned flips over time.

Inflation, the number nobody shows you

A twenty or thirty year projection in nominal terms overstates what you will actually be able to buy. With 10,000 to start and 300 a month at 6% for 20 years you end with about 171,700 nominal; at 2.5% inflation that is worth about 104,800 in today's money. You lost 39% of your purchasing power along the way and no figure in the table said so. Fill in the inflation field and the calculator adds that column.

Common mistakes

• Using an optimistic return. One extra point a year turns into tens of thousands over thirty years. When in doubt, project with a conservative figure and let the surprise be a good one.
• Forgetting fees. A fund charging 1.5% a year takes that point and a half out of your return, every year, compounding just like everything else.
• Ignoring tax. This projection is gross: depending on where you live and what you save into, returns are taxed either on withdrawal or every year.
• Pausing contributions. Stopping for two years at 30 costs far more than stopping for two years at 55, because it is the earliest contributions that have the most time to compound.

Frequently asked questions

How much do I need to save monthly to reach a specific figure?

Try a contribution, look at the ending balance and adjust. Two or three attempts are enough to bracket it, and watching the result move teaches you more about the weight of time than a number handed to you.

What return should I use?

It depends entirely on where you put the money, and nobody can promise you one. The honest approach is to project two scenarios, one cautious and one optimistic, and make decisions that survive the cautious one.

Does the calculator account for tax or fees?

No. It calculates gross growth from the capital and contributions you enter. Product fees and taxes sit outside it and reduce the real outcome, sometimes considerably.

This tool projects growth from the figures you enter. It does not predict future returns, does not include fees or taxes, and is not financial or investment advice.