Key formula
How compounding works
When returns are added to principal, later periods can generate returns on both the initial deposit and previously earned interest. The compounding period matters.
A quoted rate may be nominal or effective and expressed annually or monthly. Always check its meaning before converting between periods.
Simple example without contributions
Imagine an initial $1,000 at a hypothetical 10% effective annual interest rate, for two years with no withdrawals. The first year ends at $1,100; the second year ends at $1,210.
The $210 gain is a mathematical outcome of the example, not an investment promise. Real products may lose value or charge taxes and fees.
What about monthly contributions?
Regular deposits change the outcome depending on their amounts, timing and the conversion of the annual rate into monthly periods. The simulator uses a stated contribution convention; review it before interpreting results.
Limits of this estimate
Inflation, fees, taxes, fluctuating rates and loss of principal can affect the real result. Use the calculator for learning and scenario comparisons rather than guaranteed financial forecasts.
Educational content: verify the conditions of your real situation before relying on the result.