Compound interest is the process of earning returns not just on your initial investment, but also on the returns that investment has already generated. In other words, your money earns interest, and then that interest earns interest too.

For example, if you invest $1,000 at a 10% annual return, you'll have $1,100 after one year. In year two, you earn 10% on the full $1,100—not just the original $1,000—giving you $1,210.

This differs from simple interest, where you only earn returns on your original principal. Compound interest accelerates growth because your earnings keep working for you.

The most powerful factors in compound interest are time and consistency. Starting early gives your investments more time to compound, and even small regular contributions can lead to significant growth over decades.

Staying invested through market cycles is equally important. Pulling money out or stopping contributions during downturns interrupts the compounding process and can drastically reduce long‑term returns.

Try adjusting the time horizon and contribution amounts to see how small changes—like starting five years earlier or adding an extra $100 per month—can transform outcomes.

Compound interest works across a range of investment vehicles. High‑yield savings accounts and certificates of deposit offer modest but predictable returns with minimal risk, making them suitable for shorter time horizons or emergency funds.

For longer‑term goals like retirement, low‑cost index funds and ETFs provide exposure to stocks and bonds with historically higher average returns. These investments carry more volatility, but compounding can smooth out short‑term fluctuations over decades.

This is not personalised financial advice. Your investment choices should reflect your time horizon, risk tolerance, and goals.

Compound interest depends on four core variables: the principal (your starting amount), the interest rate or rate of return, the length of time you stay invested, and how frequently interest is compounded.

You don’t need to memorise formulas to benefit from compounding—the intuition is simple: your money grows, and then the growth itself grows.

As a rough example, if you invest $10,000 today with no additional contributions, earning an average annual return of 7%, compounded annually, in 20 years that initial investment would grow to approximately $38,700.

Actual results depend on the return you achieve, inflation, fees, taxes, and timing. Use the calculator to model scenarios that match your assumptions.

Regular contributions amplify the power of compound interest. When you add money consistently—whether monthly or annually—you’re increasing your balance and giving more capital the opportunity to compound.

Use the calculator to see how contribution amount and frequency changes your projected balance over time.