See how money grows when interest earns interest. Enter a starting amount, a monthly deposit, a rate and the number of years, and follow your balance year by year.
With simple interest you earn interest only on the money you put in. With compound interest the interest is added to your balance, and from then on it earns interest too. In the first years the difference is small. Over long periods it becomes the biggest part of your savings.
Example: 10,000 left untouched at 7% a year, added once a year, grows to about 19,670 in 10 years. It almost doubles without a single extra deposit.
Start with the same 10,000 and add 200 every month for 20 years (7%, added monthly), and the balance reaches about 144,570: 58,000 of your own money and about 86,570 of interest.
Time is the strongest part of the formula. Saving 100 a month at 7% gives about 52,100 after 20 years, but about 122,000 after 30 years. The extra 10 years add only 12,000 of deposits, yet the balance more than doubles. That is why even small amounts are worth starting now.
To estimate how long it takes to double your money, divide 72 by the yearly rate: 72 ÷ 6 = about 12 years, 72 ÷ 8 = about 9 years. It is a quick way to compare rates without a calculator.
Compound interest is interest earned on your deposits and on the interest you already earned. Each period the interest is added to the balance, so the next period's interest is a little bigger, and growth speeds up over time.
It is how often interest is added to the balance: yearly, quarterly, monthly or daily. More often means slightly more growth at the same yearly rate, but the difference is small compared with the rate and the number of years.
At the end of each month, after that month's interest. This is a common, slightly conservative way to estimate.
Only if the rate is fixed, like a savings account or a fixed deposit. Investments such as shares or funds go up and down, so treat the result as an example of what an average return could give, not a promise.
A quick way to estimate how long money takes to double: divide 72 by the yearly rate. At 6% money doubles in about 12 years, at 9% in about 8 years.
A calculator gives you one answer. A cashbook shows you the whole picture: write down cash in and cash out, see where the money goes in charts and on a calendar, and share a ledger with your family, team or friends.
This takes a few seconds.
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