With compound interest, the interest you earn starts earning interest of its own. 10,000 invested at 6% with 300 added every month grows to about 171,714 in 20 years, of which 89,714 is interest. Enter your starting amount, the monthly addition, the yearly rate and the period; the calculator also shows how long your money takes to double.
How 10,000 grows, with nothing added
Compounded once a year:
| Yearly rate | 10 years | 20 years | 30 years |
|---|---|---|---|
| 3% | 13,439 | 18,061 | 24,273 |
| 5% | 16,289 | 26,533 | 43,219 |
| 7% | 19,672 | 38,697 | 76,123 |
| 10% | 25,937 | 67,275 | 174,494 |
At 7%, the money roughly doubles every ten years: 10,000 becomes about 20,000, then 40,000, then 80,000. The last decade adds more than the first two together.
Saving 200 a month from zero
Compounded monthly, deposits at the end of each month:
| Yearly rate | 10 years | 20 years | 30 years |
|---|---|---|---|
| 3% | 27,948 | 65,660 | 116,547 |
| 5% | 31,056 | 82,207 | 166,452 |
| 7% | 34,617 | 104,185 | 243,994 |
| 10% | 40,969 | 151,874 | 452,098 |
Over 30 years you put in 72,000. At 7%, compounding turns that into nearly 244,000: more than two-thirds of the result is interest. Starting ten years later and saving for 20 years instead gives 104,185 – less than half.
The rule of 72
| Yearly rate | Rule of 72 | Exact years to double |
|---|---|---|
| 2% | 36.0 | 35.0 |
| 4% | 18.0 | 17.7 |
| 6% | 12.0 | 11.9 |
| 8% | 9.0 | 9.0 |
| 10% | 7.2 | 7.3 |
| 12% | 6.0 | 6.1 |
The rule works best between about 6% and 10%. It also works in reverse for inflation: at 3% inflation, prices double in about 24 years.
Rate, return and reality
A savings account pays a known rate. Investments such as stock funds have no fixed rate: their long-run average return is uncertain and individual years swing up and down, so use a cautious figure and treat the result as a scenario, not a promise. Taxes on interest and gains, fund fees and inflation all reduce what you keep; a 1% yearly fee on a 30-year plan can take away about a quarter of the final balance.
How the calculator compounds
The yearly rate you enter is nominal, compounded 1, 4, 12 or 365 times a year. It is turned into the equivalent monthly rate, so monthly deposits grow on the same basis as the starting amount. Deposits are added at the end of each month.
The figures you try never leave your device, and once zet4u is saved there the calculator works offline.
Frequently asked questions
What is compound interest?
Interest that earns interest. Each period, the interest is added to your balance, and the next period's interest is calculated on the larger amount. Over long periods, this snowball effect does most of the work.
How much will 10,000 grow at 7% in 30 years?
To 76,123 with interest compounded once a year and nothing added. Adding 200 at the end of every month brings the total to about 310,000; with monthly compounding, about 325,000.
What is the rule of 72?
A shortcut for the years it takes money to double: divide 72 by the yearly rate. At 6% that is 12 years; the exact figure is 11.9.
Does compounding frequency matter much?
Less than people think. At 6%, monthly compounding gives an effective 6.17% a year and daily 6.18%, against 6% for yearly. The rate and the time matter far more.
Sources
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