How to Use This Calculator
- Enter your starting principal: The lump-sum cash balance currently available.
- Set periodic monthly contributions: Regular monthly savings significantly amplify long-term returns.
- Specify annual rate of return: Typical historical index fund returns average 7%–10% before inflation.
Formula and Calculation Steps
Future Value = P × (1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]Worked Examples and Reference Table
| Years | Starting $10k (7% return) | With $200/mo Added |
|---|---|---|
| 5 Years | $14,025 | $28,247 |
| 10 Years | $19,671 | $53,607 |
| 15 Years | $27,590 | $89,286 |
| 20 Years | $38,696 | $139,364 |
| 30 Years | $76,122 | $299,655 |
Frequently Asked Questions
How does compound interest differ from simple interest?
Simple interest is earned only on the initial principal. Compound interest earns interest on both the initial principal and previously accumulated interest, accelerating returns exponentially over time.
What is the Rule of 72?
The Rule of 72 is a quick mental math shortcut: divide 72 by your expected annual rate of return to estimate how many years it will take for your money to double (e.g. at 8%, 72 / 8 = 9 years).
How does compounding frequency impact returns?
More frequent compounding (daily vs monthly vs annually) increases your Annual Percentage Yield (APY) because interest is converted to earning principal more often.
Are regular monthly contributions better than lump-sum deposits?
Regular contributions (dollar-cost averaging) smooth out market volatility and harness compounding over decades, though investing lump sums earlier gives capital more total time to compound.
Does inflation diminish compound interest gains?
Yes. To gauge your real purchasing power growth, subtract the expected annual inflation rate from your nominal return rate (the real rate of return).