| Year | Balance | Contributed | Interest |
|---|---|---|---|
| 1 | $17,055 | $16,000 | $1,055 |
| 2 | $24,695 | $22,000 | $2,695 |
| 3 | $32,970 | $28,000 | $4,970 |
| 4 | $41,932 | $34,000 | $7,932 |
| 5 | $51,637 | $40,000 | $11,637 |
| 6 | $62,148 | $46,000 | $16,148 |
| 7 | $73,531 | $52,000 | $21,531 |
| 8 | $85,859 | $58,000 | $27,859 |
| 9 | $99,210 | $64,000 | $35,210 |
| 10 | $113,669 | $70,000 | $43,669 |
| 11 | $129,329 | $76,000 | $53,329 |
| 12 | $146,288 | $82,000 | $64,288 |
| 13 | $164,655 | $88,000 | $76,655 |
| 14 | $184,546 | $94,000 | $90,546 |
| 15 | $206,088 | $100,000 | $106,088 |
| 16 | $229,419 | $106,000 | $123,419 |
| 17 | $254,685 | $112,000 | $142,685 |
| 18 | $282,049 | $118,000 | $164,049 |
| 19 | $311,684 | $124,000 | $187,684 |
| 20 | $343,778 | $130,000 | $213,778 |
Understanding Compound Interest
Compound interest is what happens when your investment earns returns, and those returns start earning returns of their own. It's the single most powerful force in wealth building, and it's why starting early matters more than investing large amounts later.
The compound interest formula
The formula is A = P(1 + r/n)^(nt), where A is the final amount, P is your initial principal, r is the annual interest rate, n is the number of times interest compounds per year, and t is the number of years. Our calculator handles this automatically and adds the effect of regular monthly contributions.
Why starting early beats investing more
Someone who invests $300/month from age 25 to 35 (10 years, $36,000 total) and then stops will have more at age 65 than someone who invests $300/month from age 35 to 65 (30 years, $108,000 total), assuming the same return rate. That's the power of compound interest — time is more valuable than money.
Monthly vs. daily compounding
The difference between monthly and daily compounding is smaller than most people think. On a $10,000 investment at 8% for 20 years, daily compounding gives you about $200 more than monthly. The real game-changer is your contribution amount and consistency, not compounding frequency.
The Rule of 72
Want a quick shortcut? Divide 72 by your annual return rate to estimate how many years it takes to double your money. At 8% returns, your money doubles roughly every 9 years. At 10%, every 7.2 years.