The base formula
For a one-time deposit, use A = P(1 + r / n)^(nt). P is principal, r is the annual rate, n is compounding periods per year, and t is time in years.
How-To Guide
How to Calculate Compound Interest
Compound interest grows when each period earns interest on both the original principal and the interest already added. The core math is simple, but recurring deposits are much easier to model with a calculator.
5 min read Updated April 7, 2026
Quick steps
- Convert the annual rate into the rate per compounding period.
- Turn the full timeline into the total number of compounding periods.
- Multiply the principal by the compound growth factor.
- Add recurring contribution growth separately when deposits happen every month.
Manual example
If you start with $10,000 at 6% annual return compounded monthly for 10 years, the formula becomes 10,000 x (1 + 0.06 / 12)^120. The future value is about $18,194.
When to switch to a calculator
A calculator saves time when you add monthly deposits, compare multiple timelines, or want totals broken into contributions versus interest.
- You are adding recurring monthly contributions
- You want to compare annual versus monthly compounding
- You need future value, total deposits, and total interest in one view
Frequently Asked Questions
What is the main difference between simple and compound interest?expand_more
Simple interest grows from principal only, while compound interest also earns on previously accumulated interest.
Does more frequent compounding always help?expand_more
At the same nominal annual rate, more frequent compounding usually produces a slightly higher ending balance.
Can monthly deposits still be done by hand?expand_more
Yes, but the formula gets longer and is much harder to check than using a calculator.
Try the compound interest calculator
Plug in principal, monthly deposits, return, years, and compounding frequency to compare scenarios instantly.
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