Compound interest is the mechanism that makes long-term investing work. Instead of earning interest only on what you originally deposited, you earn interest on the principal plus every interest payment you have already received. Over decades, this small difference produces dramatically different outcomes. This calculator projects the future value of a lump sum combined with regular monthly contributions, letting you compare scenarios side-by-side before committing to a savings plan.

How compound interest works

Imagine you deposit €10,000 at a 7% annual return. After one year you have €10,700. In year two, the 7% applies to the full €10,700, so you earn €749 instead of another €700. By year thirty, the original €10,000 has become roughly €76,123 — more than seven times the principal — even though you never added another cent.

The general formula for a single lump sum is:

A = P · (1 + r/n)^(n·t)

And with regular monthly contributions, the future-value annuity term is added on:

A = P · (1 + r/n)^(n·t) + PMT · [((1 + r/n)^(n·t) − 1) / (r/n)]

Where:

A is the future value
P is the starting principal
r is the annual interest rate as a decimal (7% = 0.07)
n is the number of compounding periods per year (12 for monthly, 4 for quarterly, 1 for annual)
t is the number of years
PMT is the amount added each period

Compounding frequency matters (a little)

The more often interest is compounded, the higher the final balance — but the difference between monthly and daily compounding is small. At 7% over 30 years:

Annually compounded: €76,123
Monthly compounded: €80,373
Daily compounded: €81,613

Most savings accounts and index funds effectively compound daily, but in practice you care more about the nominal rate and the fees than the compounding frequency.

The Rule of 72

A quick mental estimate: divide 72 by the annual rate to get the number of years for the balance to double.

6% → doubles every 12 years
7% → doubles every 10.3 years
10% → doubles every 7.2 years

This rule is a linear approximation that is most accurate between 4% and 12%. It is useful for sanity-checking a projection without pulling out a calculator.

Worked example

Start with €5,000. Add €500 per month. Earn 7% per year, compounded monthly. Hold for 25 years.

Future value of the lump sum: 5,000 × (1 + 0.07/12)^(12·25) ≈ €28,520
Future value of the contributions: 500 × [((1 + 0.07/12)^(12·25) − 1) / (0.07/12)] ≈ €406,014
Total: ≈ €434,534

You contributed €5,000 + €500 × 12 × 25 = €155,000 of your own money. The remaining €279,534 is pure compounding.

If you increase the monthly contribution to €750 and leave everything else the same, the ending balance jumps to roughly €637,000. That is the leverage of a higher savings rate: each extra euro contributed early in the window does about 5× the work of the same euro contributed in year 20.

How to use this tool

Enter your starting balance (the principal you already have).
Enter your monthly contribution — the amount you plan to add every month.
Set the annual rate of return. For conservative projections, many advisors assume 5–7% real return on a diversified stock portfolio; 2–4% for bonds; 0–1% for cash.
Set the time horizon in years.
Review the final balance, total contributions, and total interest earned. Compare scenarios by duplicating the entry and tweaking one variable.

What the calculator does not account for

To keep the projection simple, this tool uses a fixed nominal rate. Real-world returns deviate from that model in four important ways:

Inflation — a 7% nominal return at 3% inflation is roughly a 4% real return. A million euros in 30 years will not buy a million euros of goods today.
Taxes — investment gains are taxed in most jurisdictions. Tax-advantaged accounts (IRAs, ISAs, pension wrappers) can shield decades of compounding.
Fees — a 1% annual management fee sounds small, but over 30 years it can reduce the final balance by 20–25%. Low-cost index funds matter here.
Volatility — returns are not a smooth line. Sequence-of-returns risk (bad years early in retirement) matters more than the average.

Use the calculator to form a baseline, not a forecast.

Frequently asked questions

What rate of return should I use?

Historically, a broad global equity index has returned around 7–8% per year nominal (5–6% real after inflation). Bonds have returned 2–4%. Cash and high-yield savings are close to inflation. Match the rate to the asset mix you actually plan to hold, and consider running both an optimistic and a conservative scenario.

Should I pay off debt or invest first?

If your debt carries a higher interest rate than your expected return, the math favors paying it down — it is a guaranteed “return” equal to the interest rate. Credit-card debt at 18% is almost always the priority. A fixed-rate mortgage at 3% is a different calculation.

How does inflation affect my final balance?

If you want a real (inflation-adjusted) number, use a real rate of return in the calculator. For example, if you expect 7% nominal and 3% inflation, enter 4% to see today’s purchasing power. Alternatively, project in nominal terms and discount the result by (1 + inflation)^years.

Why does starting early matter so much?

Because compounding is exponential. A euro invested in year 1 doubles roughly 3–4 times over 40 years; the same euro invested in year 20 doubles only 1–2 times in the remaining 20 years. Early contributions spend longer compounding.

Do I need to keep contributing every month?

No. Set PMT = 0 and the formula reduces to the lump-sum case. But consistent contributions smooth out market timing and take advantage of dollar-cost averaging during downturns.

Privacy note

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Compound Interest Calculator