Compound Interest Calculator

What does a compound interest calculator show you?

A compound interest calculator shows how much money you end up with when you earn returns on your returns. In other words, interest from earlier periods starts earning interest too. With simple interest you earn the same amount every year; with compound interest the returns start earning too. As a result, growth curves upwards and the gap widens with time.

Here is an example calculation. €10,000 at 7% simple interest becomes €24,000 after 20 years. The same money at a 7% effective compound return reaches €38,696.84, so the extra €14,696.84 comes entirely from returns on returns. After the first 10 years the balance stands at €19,671.51; the second decade then does most of the work.

I did not stop at the textbook formula when I built this tool. Because it steps through every month, you can combine regular contributions, yearly increases, tax and inflation in one plan. If you want to double check a quick percentage along the way, the percentage calculator helps too.

When is this compound interest calculator most useful?

You reach for it whenever a savings decision needs numbers. For example, you can compare a fixed rate offer, a fund's expected return or a university fund on one screen. In particular, it answers four questions quickly:

• How much will I have? The final value from a starting balance, monthly savings, return and time.
• How much should I save? The monthly or yearly contribution needed for a target.
• When will I get there? The years and months your current contribution needs.
• What is it really worth? The value in today's money after inflation.

For offers quoted in days, work out the term between two dates with the date calculator and enter it in months. That way you compare a 95 day notice account and a one year bond on the same basis.

That said, the tool gives no investment advice. The return you enter is an assumption. So run a few scenarios with different rates and look at the range instead of one number.

AER or nominal rate: which one should you enter?

The two options read the same annual rate differently. A nominal rate is the headline yearly rate that the bank divides by the number of compounding periods. The effective rate, called AER in the UK, is the growth you actually get over one year. For instance, a 6% nominal rate compounded monthly equals an AER of 6.17%, and 4.5% compounded daily equals 4.60%.

In practice, choose like this:

• Savings accounts and fixed rate bonds: pick Nominal rate and set the compounding: daily, monthly, quarterly or yearly. If the bank quotes an AER, simply pick Effective rate.
• Funds, ETFs and share portfolios: pick Effective rate; fund returns already come as yearly compound rates.
• Not sure? A figure labelled annual return or AER is almost always effective.

With yearly and quarterly compounding, the tool builds up interest within the period as simple interest. Then it adds that interest at the end, the way banks do. A contribution made in the middle of a quarter therefore earns only its share of that quarter's interest. In short, set the compounding correctly and the result stays close to your bank statement.

How do tax and inflation change the result?

A calculation with the gross rate overstates what you keep. In the UK, interest inside an ISA is tax free. Outside an ISA, the Personal Savings Allowance covers £1,000 of interest a year for basic rate taxpayers. Higher rate taxpayers get £500 and additional rate taxpayers nothing. To model this, choose Custom rate and enter your tax rate and allowance. Then set tax to every year, as in row 6 of the example table.

Inflation is the second filter. The real value converts the net final amount into today's purchasing power: net amount ÷ (1 + inflation)^years. The European Central Bank and the Bank of England both aim for 2% inflation over the medium term. That is why the field starts at 2 for euros, pounds and dollars.

If your return stays below inflation, your balance can grow while your real wealth shrinks. So keep your own inflation expectation in the field and compare nominal and real values before you decide.

How does tax on savings work in Germany and Austria?

If you live or invest in Germany, the tax options bring the result much closer to reality. Germany levies a 25% Abgeltungsteuer on capital income plus a 5.5% solidarity surcharge on top, 26.375% in total. With church tax the combined rate rises to 27.8186% or 27.9951%. The Sparerpauschbetrag keeps €1,000 of capital income a year tax free for single people and €2,000 for married couples filing jointly.

For accumulating ETFs, Germany also taxes a notional minimum return every year, the Vorabpauschale. It equals the value at the start of the year × Basiszins × 0.7, capped at that year's gain. The Basiszins for 2026 is 3.20%. Equity funds get a 30% partial exemption. When you sell, the Vorabpauschale you already paid tax on comes off the gain. Therefore you never pay tax twice on the same income. The tool assumes the plan starts in January and that the tax leaves your cash account each January.

Austria charges 25% KESt on bank interest and 27.5% on funds, shares and other capital income, with no yearly allowance. Choose between taxing every year or at sale to see both limits. However, real fund taxation depends on the deemed distributed income that funds report each year. Read the result as an estimate range.

How does the savings goal mode work?

In the Savings goal tab you first type the amount you want to reach. Then you add the starting balance, return and time, and the tool shows the monthly contribution you need in large figures. Example calculation: to reach €250,000 in 20 years from €10,000 at a 7% effective return, you need to save €416.33 a month.

The same screen gives you a second answer. Enter what you can save today in the contribution field, and the tool searches month by month for when you reach the goal. At €200 a month you get there in 27 years and 3 months. Consequently you can weigh a higher contribution against a longer timeline without guesswork.

If you think of the goal in today's money, tick the inflation adjusted box. The tool then inflates the target into future money and finds the matching contribution. At 2% inflation, for instance, the €250,000 goal becomes €371,486.85 and the monthly amount €655.70. With tax selected, it finds the contribution that makes the net result match the goal. Also note that with a yearly increase the amount shown is the first year's contribution.

Where does compounding show up in your business?

Compounding works in business growth too, not only in a bank account. In digital marketing the clearest example is organic traffic. Paid visitors stop the day the budget stops; solid content and technical foundations add to last month's results every month. As a result, SEO often follows a slow start and then a steeper curve. I explain that curve in detail in how long SEO takes.

You can read budget decisions the same way. Paid ads return quickly but do not accumulate; organic growth is slower but it builds on itself. I share how I balance the two in organic growth or paid ads. On the paid side, the ROAS calculator is a good way to check profitability.

If you want your site's organic traffic to become an asset that compounds, see how I work on the SEO consulting page.