Compound interest formula
A = P × (1 + r/n)^(n × t)P is the principal, r the annual rate, n compounding periods per year and t the number of years. With monthly contributions, each deposit compounds from the month it is added.
Worked example
10,000 at 8% compounded monthly for 10 years grows to about 22,196. The interest earned (12,196) is more than the original amount. Add 200 a month and the total reaches about 58,785.
Frequently asked questions
What is compound interest?
Interest earned on both your original amount and on interest already earned. Over long periods this “interest on interest” makes growth accelerate, unlike simple interest, which only grows on the principal.
Does compounding frequency matter?
Slightly. More frequent compounding gives a higher effective annual rate: 10% compounded monthly is about 10.47% a year. The difference grows with higher rates and longer periods.
When are the monthly contributions added?
At the end of each month. Contributions then earn interest from the next compounding period onwards.
Results are estimates for educational purposes only and are not investment, tax or financial advice. Verify figures with your broker or advisor before acting on them.