How much could your money grow if interest is reinvested — and you keep adding a little every month? That is what this one works out.

What is compound interest?

Simple interest only pays on the money you put in. Compound interest also pays on interest you have already earned. Over a short stretch, the difference is small. Over years — and decades — it is enormous.

For a single deposit, the formula is A = P × (1 + r/n)^n×t, where P is the starting amount, r is the annual rate, n is the number of times interest is added per year, and t is the number of years. With regular monthly contributions, our calculator works through every month in turn, adding your deposit and crediting interest at each compounding point.

Example: the power of time

Starting with $5,000 and adding $200 a month at 5% a year (compounded monthly), you would have about $96,000 after 20 years. You would have paid in $53,000, so around $43,000 is interest. Leave it for 30 years instead and it grows to about $189,000, with interest now making up more than half of it.

The Rule of 72

Here is a quick shortcut: divide 72 by your annual return for a rough idea of how many years it takes to double your money. At 6%, that is about 12 years; at 9%, about 8 years.

Where to earn compound interest

• US: high-yield savings accounts, CDs, 401(k)s and IRAs (where investment growth compounds tax-deferred or tax-free).
• UK: easy-access and fixed-rate savings accounts, Cash ISAs, and Stocks & Shares ISAs or pensions, where growth is shielded from tax.

Frequently asked questions

For illustration only. Past performance doesn't guarantee future returns.