Compound Interest Calculator

Compound Interest and Regular Deposits

Compound interest earns interest on earlier interest as well as your deposited money. Regular deposits add more money to that growing balance. The calculator separates the money you put in from the interest generated by your entered rate.

Money contributed includes the starting balance and every monthly deposit. Interest earned is the closing balance less those contributions. At a zero rate, the closing balance is simply all the money you contribute.

Daily and Monthly Compounding

Monthly compounding applies one twelfth of your nominal annual rate each month. Daily compounding applies one 365th each day. At the same positive nominal rate, daily compounding produces a slightly higher effective annual return.

The comparison keeps the deposit amount and timing unchanged. Start-of-month deposits enter before that month's growth. End-of-month deposits enter after it, so they earn no interest in their deposit month.

This model divides a year into twelve equal months. Daily mode uses 365/12 daily periods per month, including a fractional period. It uses exponential growth between those boundaries. Actual savings accounts can calculate daily interest but credit it monthly, which differs from daily compounding.

Saving for a Deposit

Enter the deposit you want to save as the target balance. The result shows the total monthly contribution needed to reach it within your chosen period. It includes the growth of your starting balance and rounds the required contribution up to the next cent.

The target figure is the full monthly deposit, not an extra payment on top of your entered amount. If the starting balance alone grows enough to meet the target, the required monthly deposit is $0.

With a zero-month period, only your existing balance is available. A higher target cannot be reached through monthly deposits in that period. Extending the period or increasing your starting balance changes that result.

Allow separately for property purchase costs when choosing a house-deposit target. Fees and tax reduce money available to grow. A changing savings rate can also move the outcome away from this constant-rate estimate.

Formula and Worked Example

Without regular deposits, the closing balance is P × (1 + r/n)^(n × t). P is the starting balance, r is the nominal annual rate as a decimal, n is compounding periods per year and t is years.

Moneysmart's worked example uses $2,000 at 5% annual interest, compounded monthly for two years. Enter $2,000, a $0 monthly deposit, 5% and 24 months here. The closing balance is $2,209.88, including $209.88 interest.

For a short hypothetical example, enter $1,000, $100 monthly deposits, 12% annual interest and two months with monthly compounding. End-of-month deposits produce $1,110 after month one and $1,221.10 after month two. Contributions total $1,200, leaving $21.10 interest.

Changing only the deposit timing to the start of each month gives $1,111 after month one and $1,223.11 after month two. The extra $2.01 comes from letting each deposit earn interest for one more month.

For end-of-month deposits, multiply each month's opening balance by one plus the monthly rate, then add the deposit. For start-of-month deposits, add the deposit before multiplying. Daily mode first converts the daily rate into the equal-month growth factor described above.

ASIC's Moneysmart compound interest calculator uses the same principle of interest earning further interest. Its published assumptions place regular deposits at period end and credit interest monthly or annually. Match rate conventions and deposit timing before comparing results.

Superannuation Growth Illustrations

You can apply the calculation to an entered super balance and monthly contributions. Use contributions that actually reach the account after contribution tax. The entered growth rate must reflect any tax and percentage fees you intend to allow for.

This tool does not separately deduct fund administration fees or insurance premiums. It also leaves out contribution caps, government contributions and changes in salary or employment. Salary sacrifice amounts before tax can therefore overstate the deposits that reach your balance.

An illustrative super balance does not calculate an Age Pension entitlement or a defined-benefit scheme payout. Investment returns can fall as well as rise. This calculator accepts non-negative constant rates, so it cannot model market losses or the order of changing returns.

Moneysmart's superannuation calculator has separate controls for contributions, fund fees and insurance. It adjusts results into today's dollars. This tool shows future dollars without an inflation adjustment, so the displayed balances are on different bases.