Finance

Compound Interest Calculator

Discover the power of time and how your investments can grow exponentially.

Compound interest is one of the fundamental principles of personal finance: the interest your investment generates is reinvested and in turn generates new interest. Over the long term, this cumulative effect can exponentially multiply the initial capital. Einstein described it as the 'eighth wonder of the world': those who understand it earn it, those who don't understand it pay it.

This calculator lets you project the growth of your savings or investments over time, including periodic contributions. You can select different reference funds or indices (S&P 500, MSCI World, Nasdaq 100...) or manually enter an estimated interest rate. The chart shows the month-by-month evolution of total capital, distinguishing between what has been contributed and what has been generated by interest.

Investment Details

Enter the data and press Calculate to see the projection.

Indicative projection based on historical rates. Markets may behave very differently in the future. All investments carry risk of loss.

How compound interest is calculated

The basic formula is C = C₀ · (1 + i)^n, where C₀ is the initial capital, i the annual interest rate expressed as a decimal and n the number of years. The exponent is what matters most: each year multiplies the accumulated capital, not just the initial amount, which is why growth accelerates over time. When you also make regular contributions, the future value of that series is added to the previous result, calculated with the expression A · [((1 + i)^n − 1) / i]. The calculator combines both terms to give you the final capital, the total contributed and the interest generated, separately.

Worked example

Take €10,000 invested at 7% a year for 20 years, with no further contributions. We apply C = 10,000 × (1 + 0.07)^20 = 10,000 × 3.8697 = €38,697. You contributed €10,000 and generated €28,697 in interest, almost triple your initial investment. If you also contributed €200 a month (€2,400 a year), the future value of those contributions would be about €98,400, bringing the final capital above €137,000 having put in €58,000 of your own money.

Growth of €10,000 at 7% a year

Years	Accumulated capital	Interest generated
5	14.026 €	4.026 €
10	19.672 €	9.672 €
15	27.590 €	17.590 €
20	38.697 €	28.697 €
25	54.274 €	44.274 €
30	76.123 €	66.123 €

How to interpret the result

Focus above all on the ratio between what you contributed and the interest generated, because that is the metric that reveals the power of compounding. Over short periods most of the final capital comes from your contributions; from around fifteen or twenty years onwards the interest starts to exceed them and growth becomes far steeper. Bear in mind two limitations as well: the calculator assumes a constant return, whereas real markets fluctuate and can string together negative years, and it discounts neither inflation nor the taxation of savings, which in Spain taxes capital gains at between 19% and 30% when you cash in the investment.

About Compound Interest

Compound interest is calculated on the initial capital plus all the interest accumulated up to that point, rather than only on the starting amount. In other words, interest itself generates further interest, producing exponential, snowball-like growth. This is the fundamental difference from simple interest, where the return is always computed on the initial sum and growth is linear. Over short periods the difference between the two is small, but over twenty or thirty years it becomes enormous.

Because time is the most decisive variable in compound interest, even more than the amount you contribute. Growth is exponential rather than linear, so the final years of a long investment add far more capital than the early ones. Starting ten years earlier with modest contributions usually produces a larger final sum than starting late with much bigger ones, simply because the money has had more cycles to be reinvested. That is why regular contributions started early are so effective.

Each fund or index (S&P 500, MSCI World, Nasdaq 100...) has a percentage reflecting its historical long-term average annual return, without discounting inflation. These are indicative figures to show how your investment would grow with similar past performance. When you select a fund, that percentage is automatically applied as the estimated interest, but you can adjust it manually at any time. Remember: past performance does not guarantee future results and all investments carry risk of loss.

The calculator shows capital in nominal euros, that is, without discounting the loss of purchasing power. With average inflation of 2% a year, €100,000 in 25 years would buy roughly what €61,000 buys today. To think in real terms it helps to use the real return, obtained by subtracting inflation from the nominal return: if you expect a 7% return and 2% inflation, your real return is around 5%. Entering that 5% into the calculator gives you the final capital expressed in today's purchasing power, which is usually the more useful figure for planning.

With simple interest the return is always calculated on the initial capital, so growth is linear: €10,000 at 7% generates €700 every year, unchanged. With compound interest the returns are reinvested and start generating returns themselves, so the annual gain increases over time. In the example above, the second year would generate €749 instead of €700, the third €801, and so on. Over ten years simple interest would give €17,000 and compound interest €19,672; over thirty years the gap widens to €31,000 versus €76,123.

It depends on the financial product. A bank deposit may compound annually, quarterly or monthly; an investment fund accrues returns continuously through its net asset value. The higher the compounding frequency, the higher the final capital, though the difference is modest: €10,000 at 7% over 20 years gives €38,697 with annual compounding and about €40,387 with monthly compounding. This calculator uses annual compounding, the most common convention and the one most simulators use to compare products.