Enter a starting balance, annual interest rate, time period and compounding frequency. Add optional monthly contributions to see how both contributions and compounded interest can affect the ending balance.
Adjust the rate, time, compounding frequency and optional recurring contribution.
Separate the money contributed from the estimated growth created by compound interest.
The table separates recurring contributions from estimated interest growth.
| Period | Beginning Balance | Contributions | Interest Growth | Ending Balance |
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The starting balance, contribution amount, compounding frequency and time remain unchanged.
| Annual Rate | Effective Annual Rate | Total Contributions | Interest Growth | Ending Balance |
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The nominal annual rate and all other assumptions remain unchanged.
| Compounding | Nominal Rate | Effective Annual Rate | Interest Growth | Ending Balance |
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Compound interest means interest can be calculated on both the original principal and interest that has already accumulated.
Over longer periods, this can create a growing difference between simple interest and compound interest.
Principal is the amount present at the beginning of the calculation. It forms the starting base on which interest begins to accumulate.
Compounding frequency describes how often accumulated interest is incorporated into the balance. Common examples include annually, quarterly, monthly and daily.
Regular additions can have a major effect on the ending balance. Each contribution adds more principal that can potentially earn interest during the remaining time.
When interest compounds more than once per year, the effective annual rate can be slightly higher than the stated nominal rate. It reflects the effect of compounding during one year.
Compounding becomes increasingly noticeable as time increases because previously accumulated interest has additional opportunities to earn more interest.
When monthly contributions are included, this calculator uses a monthly-equivalent rate derived from the selected compounding frequency. Actual account crediting methods, timing and rates may differ.
Compound interest is interest calculated on a balance that can include both the original principal and previously accumulated interest.
A common formula is A = P(1 + r/n)^(nt), where P is principal, r is the annual rate, n is the number of compounding periods per year, and t is time in years.
Simple interest is calculated using the original principal. Compound interest can also include previously accumulated interest in future interest calculations.
When the nominal annual rate is the same, more frequent compounding generally produces a slightly higher effective annual rate and ending balance.
The effective annual rate reflects the actual one-year growth rate after accounting for compounding during the year.
Regular contributions increase the balance available to earn interest. Contributions made earlier generally have more time to participate in future growth.
Yes. A contribution made at the beginning of a period generally has slightly more time to earn interest than the same contribution made at the end of the period.
Daily compounding can produce a somewhat higher effective annual rate than monthly compounding at the same nominal rate, although the difference is often relatively small.
Not necessarily. Actual results depend on changing rates, contribution timing, account rules, fees, taxes and the institution's interest-crediting method.