A real example: $300 a month for 30 years
Start with $10,000, add $300 a month, and earn an 8% average return for 30 years. Here's the magic of compounding:
- Total you contributed: about $118,000
- Final balance: about $556,000
- Growth on top of your money: about $438,000
You put in $118,000, but you end with over half a million — the extra $438,000 is interest earning its own interest, year after year. Start even a few years earlier and the gap grows wider still. Run your own numbers above.
How compound interest works
Compound interest is the interest you earn on both your original money and on the interest it has already earned. Over short periods the effect is small, but over decades it becomes the single most powerful force in building wealth — your money starts earning money, which then earns more money.
The formula behind this calculator is the future value of a series of regular deposits:
FV = P(1 + r)n + PMT × [((1 + r)n − 1) / r]
where P is your starting amount, PMT is each contribution, r is the periodic rate, and n is the number of periods.
Why starting early matters so much
Because growth compounds, the first dollars you invest have the most time to multiply. Investing $300/month from age 25 typically produces far more than investing $600/month from age 40 — even though the second person contributes more in total. Time does the heavy lifting.
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What return rate should I use?
A common assumption for a diversified stock portfolio is 6–7% per year after inflation. Cash and bonds return less. Lower your estimate if you want a more conservative projection.
Is this guaranteed?
No. Markets fluctuate and returns vary year to year. This tool shows a smooth projection for planning, not a promise of results.
Does it account for taxes and fees?
No. For the most accurate picture, use a net return that already subtracts estimated fund fees, and remember that tax-advantaged accounts can shelter your gains.