Interest Calculator

How to use this calculator

1. Enter your initial investment — the lump sum the account starts with.
2. Add an annual contribution, a monthly contribution, or both, and say whether you contribute at the beginning or the end of each compounding period.
3. Set the interest rate and how often it compounds.
4. Enter the investment length in years and months, a tax rate if the interest is taxable, and an inflation rate to see what the end balance will actually buy.
5. Press Calculate to see the ending balance, what it is made of, and the accumulation schedule year by year or month by month.

A worked example

Invest $20,000, add $5,000 a year at the beginning of each period, at 5% compounded annually for 5 years. The ending balance is $54,535.20: $45,000 of principal — your $20,000 plus $25,000 of contributions — and $9,535.20 of interest. At 3% inflation, that balance has the buying power of $47,042.54 in today's money.

The first year shows the mechanism plainly. The $5,000 contribution goes in at the start, so interest is charged on the full $25,000 — that is $1,250, and the year closes at $26,250. In year two, interest is worked out on $31,250 and comes to $1,562.50. Each year the base is bigger, which is why the interest column climbs from $1,250 to $2,596.91 while the contribution never changes.

Where the interest comes from

The result splits interest into two lines because the two halves behave very differently. Your initial investment earns $5,525.63 — it compounds for all five years. Your contributions earn $4,009.56, even though they total $25,000, because each one only compounds from the day it arrives and the last one has barely any time at all.

Time is what flips this. Run the same plan for 20 years and the ending balance reaches $226,662.21: the initial investment's interest grows to $33,065.95, but the contributions' interest reaches $73,596.26 — more than double. A lump sum wins over short horizons; a habit wins over long ones.

What each field changes

• Contribution timing. Switching the example from beginning to end of period drops the ending balance to $53,153.79. The same money goes in; it simply spends less time invested.
• Compounding frequency. Monthly instead of annually raises the example to $54,776.32 — about $241 more over five years. More frequent compounding always earns more at the same nominal rate, but the gap is modest.
• Tax rate. A 22% rate ends the example at $52,259.47. Only $2,047.54 of the $2,275.73 difference is tax actually paid; the rest is the growth that tax would have gone on to earn.
• Inflation rate. It never changes the balance, only the buying-power line. It is the difference between a number that looks big and one you can spend.

Simple versus compound interest

Simple interest is charged on the original principal only, so it grows in a straight line: $10,000 at 5% earns exactly $500 every year, forever. Compound interest is charged on the balance, which includes the interest already earned, so it curves upward — and the longer the term, the wider the gap. Over a year or two the difference is small; over decades it is most of the result.

To work with a single lump sum and no contributions, the compound interest calculator is more direct, and the simple interest calculator covers the straight-line case.

Tips and limitations

• One steady rate. The projection holds the interest rate constant for the whole term. Real rates move, so revisit it as yours changes.
• Whole months. Terms are whole months, up to 100 years.
• Tax is a single flat rate. Real treatment depends on the account and your jurisdiction, and tax-advantaged accounts may owe nothing at all.
• Nominal unless you say otherwise. Every figure except the buying-power line is in future dollars, not today's.
• No fees or volatility. A steady rate is a reasonable model for a savings account or a bond, and a rough one for investments that rise and fall.

To project a savings habit with contributions that grow each year, see the savings calculator; to model longer-term investing, use the investment calculator. This is general educational information, not financial advice.