Simple interest is calculated only on the original principal amount. If you invest $10,000 at 5% simple interest, you earn $500 each year — no more, no less. Compound interest is calculated on the principal plus all previously accumulated interest. With the same $10,000 at 5% compounded annually, you earn $500 in year one, but in year two you earn 5% on $10,500, which is $525. In year three, you earn on $11,025, and so on. Over short periods, the difference is modest. Over decades, it is enormous. A $10,000 investment at 5% simple interest for 30 years grows to $25,000. At 5% compound interest, it grows to over $43,000. The gap widens further with monthly contributions, which is what our calculator models.

The calculator compounds monthly, meaning interest is calculated and added to your balance 12 times per year. This is the standard frequency for most savings accounts, money market accounts, certificates of deposit, and investment accounts that reinvest dividends or interest. Each month, one-twelfth of the annual interest rate is applied to the current balance, and that month's contribution is added. The following month, interest is calculated on the new, larger balance. While some accounts compound daily or continuously, monthly compounding provides a very close approximation for planning purposes and is the frequency most commonly used in financial projections.

This depends on what type of investment you are modeling. For a high-yield savings account or money market fund, use current rates which might range from 3% to 5% in a normal interest rate environment, but understand that these rates fluctuate with Federal Reserve policy. For a diversified stock market portfolio over long periods, many financial planners use 7% as a conservative long-term average annual return, accounting for historical S&P 500 returns of roughly 10% before inflation. For a balanced portfolio mixing stocks and bonds, 5-6% is a common assumption. For more conservative projections, use a lower rate to stress-test your plan. The key is to be realistic and, when in doubt, conservative — it is better to overshoot a modest target than to fall short of an aggressive one.

No. The calculator shows nominal returns — the raw dollar amounts before adjusting for inflation or taxes. Inflation reduces the purchasing power of your future dollars. If your investments earn 7% annually but inflation averages 3%, your real return is approximately 4%. To account for this, some planners use an inflation-adjusted return rate — for example, entering 4% instead of 7% to see results in today's dollars. Taxes depend on the type of account. Investments in a 401(k) or traditional IRA grow tax-deferred but are taxed as ordinary income upon withdrawal. Roth IRA and Roth 401(k) withdrawals are tax-free in retirement. Taxable brokerage accounts incur capital gains taxes. Consult a tax professional for guidance specific to your situation.

The calculator is designed for a consistent monthly contribution amount. If you plan to make irregular contributions or periodic lump sum deposits, you can approximate by averaging them into a monthly figure. For example, if you plan to invest $6,000 annually in a lump sum, entering $500 as a monthly contribution gives a reasonable approximation, though the actual result will vary slightly because the lump sum benefits from a full year of compounding while monthly contributions phase in gradually. For more complex scenarios with variable contributions, a spreadsheet or specialized financial planning software may provide more precise modeling.

Your data is completely safe and private. All calculations run locally in your browser using JavaScript. The initial investment amount, monthly contribution, interest rate, and time horizon you enter never leave your device. There is no server-side processing, no database, no cloud storage, and no analytics tracking on your input fields. We do not share any data with financial institutions, advertisers, or any third party because we simply do not have access to your data. You can verify this by opening your browser's network developer tools while using the calculator and confirming there are zero outbound requests containing your financial information. Your savings goals and projections remain entirely your own.

One of the most powerful exercises is to run the same projection with different starting ages or contribution amounts and observe the difference. Calculate the final balance if you start at age 25 with $300 per month versus starting at age 35 with the same $300 per month. The 10-year difference can amount to hundreds of thousands of dollars. Then calculate what happens if you increase your monthly contribution by just $50 or $100 — small changes that may feel manageable in your monthly budget but compound into significant sums over decades. Seeing these numbers personalized to your situation is often more motivating than generic savings advice. The calculator turns the abstract concept of compound interest into concrete, personal mathematics.