About

Saving money is rarely a linear process. The true power of wealth accumulation comes from the interplay between your initial principal, regular monthly additions, and the mathematical force of compounding. While simple interest pays you only on what you deposit, monthly compounding pays you interest on your interest, twelve times a year.

This tool is designed for savers who want to project their financial trajectory with precision. Whether you are building an emergency fund, saving for a down payment, or planning for early retirement, understanding how small monthly contributions accelerate over decades is crucial. Accuracy here matters because a difference of just 0.5% in rate or a few hundred dollars in contributions can result in a disparity of tens of thousands of dollars over a 20-year horizon.

Formulas

The calculation uses the future value formula for an annuity with compound interest. It sums the compounded value of the initial lump sum and the accumulated value of the monthly series.

A = P(1 + rn)^nt + PMT × (1 + rn)^nt − 1rn

Where n = 12 (Monthly).

Reference Data

Year	Total Principal ($)	Total Contribution ($)	Interest Earned ($)	Total Balance ($)
1	10,000	6,000	500	16,500
5	10,000	30,000	4,250	44,250
10	10,000	60,000	12,500	82,500
15	10,000	90,000	25,750	125,750
20	10,000	120,000	45,000	175,000
25	10,000	150,000	72,000	232,000
30	10,000	180,000	110,000	300,000
Reference	Based on 5% APY with $500 monthly contribution and $10k start.

Frequently Asked Questions

Yes. This calculator assumes contributions are made at the end of each month (ordinary annuity). If you contribute at the start of the month (annuity due), you gain an extra month of interest on every payment, which slightly increases the final total.

The result shown is the 'nominal' value. To understand the purchasing power of that money in the future, you would need to subtract the average inflation rate (historically around 2-3%) from your interest rate to get the 'real' return.

With monthly compounding, your interest generates its own interest 12 times a year instead of just once. While the difference is small in the short term, over 10 or 20 years, the 'interest on interest' effect becomes significant.

Skipping contributions disrupts the exponential curve. Even a temporary pause reduces the capital base upon which future compound interest is calculated, lowering the final amount more than just the value of the missed cash.

In most savings accounts, rates are variable and change with central bank policies. This calculator projects a scenario where the rate remains constant, serving as a theoretical benchmark.