Interest Calculator

How to use the interest calculator

1. Enter your starting amount, annual rate and time horizon.
2. Choose how often interest compounds and add a recurring deposit.
3. Compare the future value against simple interest, and walk the yearly table.

Compound vs simple interest

Simple interest pays only on the original principal: P × r × t. Compounding pays on the running balance, so each period's interest starts earning its own interest. The gap looks small in year one and enormous by year twenty - the growth chart on this page makes that divergence visible.

Taxes and inflation: the real return

A quoted rate is rarely what you keep. Tax takes a slice of each period's interest before it can compound, which is why the tax field shrinks the ending balance instead of just subtracting at the end. Inflation then erodes what the balance can buy: set an inflation rate and the buying-power card shows the future balance in today's money. Money only grows in real terms when the after-tax return beats inflation.

The rule of 72

For a quick doubling estimate in your head, divide 72 by the annual rate: at 8%, money doubles in roughly 9 years. It works best for rates between about 6% and 10% - use the calculator above for the exact figure.

Worked example

$5,000 at 6% compounded monthly for 10 years with $200 monthly deposits grows to about $41,873, of which roughly $12,873 is interest. The same deposits at simple interest would reach only about $32,000 - the gap is compounding alone.