Compound interest calculator

How to use this compound interest calculator

• Starting amount is what you already have invested today. Set it to zero if you are starting from scratch. The math is the same in any currency, so the symbol is just a label for your own numbers.
• Monthly contribution is what you add every month, the way most people invest through a broker savings plan.
• Increase contribution yearly raises that monthly amount once a year, useful if you expect your salary and savings rate to grow.
• Expected annual return is your assumption for average yearly growth, applied with monthly compounding.
• Time horizon is how long you stay invested. Compounding rewards the later years most, so this input moves the result more than any other.

How compound interest grows your money

Compound interest means your returns start earning returns of their own. With the default inputs, €1,000 upfront plus €250 a month at 7% a year, the projection reaches €134,270 after 20 years. Of that, €61,000 is money you put in and €73,270 is growth, so more than half of the final value comes from compounding rather than contributions.

The year-by-year table above shows why time matters so much. In year one the same €3,000 of contributions earns about €170 of growth. By year 20 the portfolio earns €8,941 in a single year, roughly three times what you contribute. Early on, your deposits do the work; later, the portfolio does.

Choosing a return assumption

The honest answer is that nobody knows future returns. Many long-term investors model somewhere between 5% and 7% a year for a diversified global stock portfolio, and less when bonds or cash make up part of the mix. The default of 7% is an assumption before fees and taxes, not a promise. Run a lower rate as well and treat the gap between the two results as your planning range.

What this projection leaves out

The calculator assumes a constant return with monthly compounding, before costs. Real portfolios do not grow in a straight line, and three things will pull the real outcome below the headline number: fund and broker fees (see the ETF fee calculator for how much a small annual fee compounds into), taxes on gains and dividends, which vary by country and account type, and inflation, which reduces what the final amount actually buys.

If you want the strategy behind the inputs, the guides on dollar-cost averaging and ETF investing for European investors cover how to set up the monthly contribution this calculator models.