Compound Interest Calculator - NerdWallet (2024)

  • Try your calculations both with and without a monthly contribution — say, $5 to $200, depending on what you can afford.

  • This savings calculator includes an example rate of return. To see the annual percentage yield you can expect, compare rates on NerdWallet for thousands of savings accounts and certificates of deposit.

» Ready to begin? Start saving with some of our favorite savings accounts or IRA providers.

ALSO CONSIDER:Savings Calculator||Emergency Fund Calculator || CD Calculator

A savings account is a place where you can store money securely while earning interest.

A savings account is a place where you can store money securely while earning interest.

Compound Interest Calculator - NerdWallet (3)

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APY

5.15%

Min. balance for APY

$0

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What is compound interest?

For savers, the definition of compound interest is basic: It’s the interest you earn on both your original money and on the interest you keep accumulating. Compound interest allows your savings to grow faster over time.

In an account that pays compound interest, such as a standard savings account, the return gets added to the original principal at the end of every compounding period, typically daily or monthly. Each time interest is calculated and added to the account, it results in a larger balance. With the compound interest formula, the account earns more interest in the next compounding period.

For example, if you put $10,000 into a savings account with a 4% annual yield, compounded daily, you’d earn $408 in interest the first year, $425 the second year, an extra $442 the third year and so on. After 10 years of compounding, you would have earned a total of $4,918 in interest.

But remember, that’s just an example. For longer-term savings, there are better places than savings accounts to store your money, including Roth or traditional IRAs and CDs.

Compounding investment returns

When you invest in the stock market, you don’t earn a set interest rate but rather a return based on the change in the value of your investment. When the value of your investment goes up, you earn a return.

If you leave your money and the returns you earn are invested in the market, those returns compound over time in the same way that interest is compounded.

If you invested $10,000 in a mutual fund and the fund earned a 6% return for the year, it means you gained $600, and your investment would be worth $10,600. If you got an average 6% return the following year, it means your investment would be worth $11,236.

Over the years, that money can really add up: If you kept that money in a retirement account over 30 years and earned that average 6% return, for example, your $10,000 would grow to more than $57,000.

In reality, investment returns will vary year to year and even day to day. In the short term, riskier investments such as stocks or stock mutual funds may actually lose value. But over a long time horizon, history shows that a diversified growth portfolio can return an average of 6% annually. Investment returns are typically shown at an annual rate of return.

Compounding can help fulfill your long-term savings and investment goals, especially if you have time to let it work its magic over years or decades. You can earn far more than what you started with.

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Compounding with additional contributions

As impressive as compound interest might be, progress on savings goals also depends on making steady contributions.

Let’s go back to the savings account example above and use the daily compound interest calculator to see the impact of regular contributions. We started with $10,000 and ended up with $4,918 in interest after 10 years in an account with a 4% annual yield. But by depositing an additional $100 each month into your savings account, you’d end up with $29,648 after 10 years, when compounded daily. The interest would be $7,648 on total deposits of $22,000.

Frequently asked questions

How do you calculate compound interest?

To calculate interest without a calculator, use the formula A=P(1+r/n)^nt, where:

A = ending amountP = original balancer = interest rate (as a decimal)n = number of times interest is compounded in a specific timeframet = time frame

What is the compound interest formula, with an example?

Use the formula A=P(1+r/n)^nt. For example, say you deposit $5,000 in a savings account that earns a 3% annual interest rate, and compounds monthly. You’d calculate A = $5,000(1 + 0.03/12)^(12 x 1), and your ending balance would be $5,152. So after a year, you’d have $5,152 in savings.

Compound Interest Calculator - NerdWallet (2024)

FAQs

How much will a $500 CD make in 5 years? ›

This CD will earn $117.15 on $500 over five years, which means your deposit will grow by 23.4%.

How much interest will I earn on $500,000 in a year? ›

Most competitive money market accounts offer APYs between 1.6% and 1.8%. A 1.8% APY would mean you earn $9,074.62 in the first year after depositing $500,000.

How much is $1000 worth at the end of 2 years if the interest rate of 6% is compounded daily? ›

Hence, if a two-year savings account containing $1,000 pays a 6% interest rate compounded daily, it will grow to $1,127.49 at the end of two years.

How long will it take for $10000 to double at 8 compound interest? ›

For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.

Why should you put $5000 in a 6 month CD now? ›

While longer-term CDs may tie up your funds for years, a 6-month CD allows you to access your money relatively quickly. If you suddenly need your $5,000 for an emergency or a more lucrative investment opportunity arises, you won't have to wait years to access your funds without incurring hefty penalties.

How much does $10000 in a CD make in a year? ›

The national average APY for a one-year CD is 1.74 percent, based on Bankrate research, which shows this average has increased or remained the same since March 2022. If you deposited $10,000 into a one-year CD that pays this national average rate of 1.74 percent, in one year it would be worth a total of around $10,174.

Can I live off interest on a million dollars? ›

Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.

Can I live off interest of 500k? ›

Key Takeaways

It may be possible to retire at 45 years of age, but it depends on a variety of factors. If you have $500,000 in savings, then according to the 4% rule, you will have access to roughly $20,000 per year for 30 years.

Can I live off the interest of $300000? ›

In most cases $300,000 is simply not enough money on which to retire early. If you retire at age 60, you will have to live on your $15,000 drawdown and nothing more. This is close to the $12,760 poverty line for an individual and translates into a monthly income of about $1,250 per month.

How many years would it take money to grow from $5000 to $10000 if it could earn 6% interest? ›

Final answer:

It would take approximately 11.90 years for the money to grow from $5,000 to $10,000 with a 6% interest rate.

How long will it take $4000 to grow to $9000 if it is invested at 7% compounded monthly? ›

Substituting the given values, we have: 9000 = 4000(1 + 0.06/4)^(4t). Solving for t gives us t ≈ 6.81 years. Therefore, it will take approximately 6.76 years to grow from $4,000 to $9,000 at a 7% interest rate compounded monthly, and approximately 6.81 years at a 6% interest rate compounded quarterly.

How long will it take for a $2000 investment to double in value? ›

The calculated value of the number of years required for the investment of $2,000 to become double in value is 9 years.

What is the miracle of compound interest? ›

Compounding is the process whereby interest is credited to an existing principal amount as well as to interest already paid. Compounding thus can be construed as interest on interest—the effect of which is to magnify returns to interest over time, the so-called “miracle of compounding.”

What is $5000 invested for 10 years at 10 percent compounded annually? ›

The future value of the investment is $12,968.71. It is the accumulated value of investing $5,000 for 10 years at a rate of 10% compound interest.

How much will $10,000 be worth in 20 years? ›

The table below shows the present value (PV) of $10,000 in 20 years for interest rates from 2% to 30%. As you will see, the future value of $10,000 over 20 years can range from $14,859.47 to $1,900,496.38.

How much can a $500 CD earn? ›

How much interest will I earn on a CD?
Deposited amountTermEarnings w/ monthly compounding interest
$5006 months$14.57
$50012 months$28.73
$50036 months$80.74
$50060 months$128.71
Dec 19, 2023

How much can you earn on a 5-year CD? ›

Interest earned by year 5:
Your earnings$1677.40
National Average$481.52
Total interest earned = $1677.40
Dec 5, 2023

How much interest can you earn on a 5-year CD? ›

The average 5-year CD yield is 1.42 percent APY, according to Bankrate's national index survey of banks and thrifts on May. 5, 2024, but Bankrate's team shopped around to find some of the best CD rates available nationwide. Compare these offers, then calculate how much interest you would earn when your CD matures.

How much does a $5000 CD make in 5 years? ›

Here's how much money you'll earn on a $5,000 5-year CD at each of these institutions: Bread Savings at 4.75%: $1,305.80 (for a total of $6,305.80 after five years) Popular Direct at 4.70%: $1,290.76 (for a total of $6,290.76 after five years)

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