Compound interest
Enter a starting amount, a return and a horizon, and see how the money grows year by year.
Final value
144,573
Starting amount plus contributions plus return.
- Total paid in58,000
- Return86,573
- Doubling time in yearsFor the capital itself, ignoring contributions.10.2
Year by year
| Year | Value | Paid in | Return |
|---|---|---|---|
| 1 | 13,201 | 12,400 | 801 |
| 2 | 16,634 | 14,800 | 1,834 |
| 3 | 20,315 | 17,200 | 3,115 |
| 4 | 24,262 | 19,600 | 4,662 |
| 5 | 28,495 | 22,000 | 6,495 |
| 6 | 33,033 | 24,400 | 8,633 |
| 7 | 37,900 | 26,800 | 11,100 |
| 8 | 43,118 | 29,200 | 13,918 |
| 9 | 48,714 | 31,600 | 17,114 |
| 10 | 54,714 | 34,000 | 20,714 |
| 11 | 61,147 | 36,400 | 24,747 |
| 12 | 68,046 | 38,800 | 29,246 |
| 13 | 75,444 | 41,200 | 34,244 |
| 14 | 83,376 | 43,600 | 39,776 |
| 15 | 91,882 | 46,000 | 45,882 |
| 16 | 101,003 | 48,400 | 52,603 |
| 17 | 110,783 | 50,800 | 59,983 |
| 18 | 121,270 | 53,200 | 68,070 |
| 19 | 132,515 | 55,600 | 76,915 |
| 20 | 144,573 | 58,000 | 86,573 |
How it works
Compound interest means the return is added to the capital and then earns a return of its own. That is why the curve bends upward instead of rising in a straight line.
The effect is modest in the early years and dramatic towards the end. At seven per cent the capital roughly doubles every ten years, however large it is.
Contributions are assumed to arrive at the end of each period. Paying in at the start of the period gives a slightly higher final value, since every contribution grows one period longer.
The compounding frequency says how often the return is added to the capital. More frequent compounding gives a slightly higher final value at the same nominal rate.
The calculation assumes the same return every year. Real investments swing, and the order of the good and bad years matters when you are paying in along the way.
The figures are nominal. At two per cent inflation, a million in thirty years is worth about 550,000 in today’s money.