Compound interest is interest earned on both your original deposit and on previously earned interest. Over time, this creates exponential growth — Albert Einstein reportedly called it "the eighth wonder of the world." The key variables are your starting amount, regular contributions, interest rate, and time horizon. Our calculator shows year-by-year growth so you can see the dramatic acceleration that happens in later years as compounding takes effect.
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (calculated only on the principal), compound interest accelerates growth because each interest payment itself earns interest going forward.
Financial advisors commonly recommend saving 15%–20% of your gross income. However, the right amount depends on your goals, timeline, and current expenses. Use the Goal Planning mode to find the exact monthly contribution needed to reach a specific target by a specific date.
A diversified stock portfolio has historically returned about 7%–10% per year before inflation (roughly 5%–7% after inflation). High-yield savings accounts offer 4%–5% currently. Bonds typically return 3%–5%. Use a rate that matches your investment strategy.
Starting early is the single most powerful savings strategy because compound interest needs time to work. Someone who invests $200/month starting at age 25 will have significantly more at retirement than someone investing $400/month starting at age 35 — even though they contributed less total money.
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