Setting up the calculation
Enter the amount you are starting with, the annual interest rate and the number of years. Pick how often interest is added: annually, quarterly, monthly or daily. If you plan to add money regularly, put that in the monthly contribution box. Otherwise leave it at 0.
If all you have is an APY from a bank, choose annual compounding, because an APY already has the compounding built in.
What compounding does to a balance
Each time interest is added, the next round is calculated on a larger balance. With n compounding periods a year, the balance grows by a factor of 1 + rate ÷ n in each period. Simple interest skips this step and is just principal × rate × years.
Contributions are treated as deposits at the end of each month. When compounding is not monthly, the tool converts your rate to the monthly rate that gives the same yearly growth, so money added between compounding dates still earns something. A real account might pay nothing on those deposits until the next compounding date, so the annual and quarterly settings can run slightly high.
Example: $10,000 at 5% for 10 years
Enter $10,000 at 5% for 10 years, compounded monthly, with $100 a month on top. The future value is $31,998.32. Your own deposits make up $22,000 of that, and total interest is $9,998.32.
The simple interest line shows $5,000.00, which is what the $10,000 alone would earn with no compounding. Compounded monthly, the same $10,000 earns $6,470.09, or $1,470.09 more.
Comparing the three figures
Future value is the closing balance. Total interest covers your starting amount and your contributions, while the simple interest figure looks only at the starting amount. Compare it with the note beneath it, not with total interest.
Frequency matters less than people expect. On $10,000 alone, annual compounding ends at $16,288.95 and daily at $16,486.65. A slightly better rate usually beats a more frequent schedule.
Where this estimate stops
The result assumes nothing changes along the way:
- The rate stays fixed, though most savings rates move.
- Tax on interest is ignored, and in a regular account it is generally taxable each year.
- There are no fees or withdrawals.
- Daily compounding uses a 365-day year.
- It models money growing. For a loan payment, use the Loan Calculator.