The power of compound interest
Compound interest means you earn returns not just on your original money, but on the returns it has already generated. Over long periods this snowball effect becomes dramatic — which is why starting early matters far more than starting big. This calculator combines your initial investment, monthly contributions, and an assumed annual return, compounded monthly, to project your future balance.
Notice how much of the final total is "interest earned" versus what you actually contributed. Over 20–30 years, growth often outpaces contributions entirely. That gap is compounding at work.
Tips for long-term growth
- Start now. An extra five years early can outweigh a much larger sum invested later.
- Automate contributions. Consistent monthly investing removes emotion and timing risk.
- Keep fees low. A 1% higher fee can quietly erase years of growth.
- Use tax-advantaged accounts like a 401(k) or Roth IRA to keep more of your returns.
Investing FAQ
What return rate should I use?
Historically the US stock market has averaged roughly 7% per year after inflation, but returns vary widely year to year. Use a conservative estimate for planning.
Does this guarantee results?
No. It's a mathematical projection, not a prediction. Actual investment returns rise and fall and can be negative in any given year.