Real Compound Interest

Compound interest is the interest you earn on both your original money and on the interest it has already earned. Because each period's growth is added to the balance before the next period is calculated, the amount you earn keeps getting larger over time. That snowball effect is why starting early matters far more than the exact rate: given enough years, a modest, steady contribution can outgrow a much larger sum invested later. This calculator shows the effect year by year so you can see how the curve steepens.

The nominal value is your balance in future dollars; the real value is what that balance can actually buy, after inflation. A pot that looks large in 30 years may purchase far less than the number suggests, because prices rise over the same period. By discounting your future balance by an assumed inflation rate, the real figure keeps you honest about progress toward goals measured in today's money, like a home deposit or a retirement income. Most people should plan around the real number, not the nominal one.

The more frequently interest compounds (daily, monthly, or annually), the slightly higher your end balance, because interest starts earning its own interest sooner. In practice the difference between monthly and annual compounding is small compared with the two things that dominate outcomes: how much you contribute and how long you stay invested. Use the compounding frequency that matches your account, but do not agonise over it - consistency and time horizon move the result far more than frequency does.

No. This is an educational projection based on the figures and assumptions you enter, using a constant rate of return. Real markets do not deliver the same return every year - they rise and fall - so your actual path will be bumpier than the smooth curve shown here. Treat the output as a planning estimate to compare scenarios, not a promise. For a view that models market ups and downs rather than a single fixed rate, try the Monte Carlo calculator, and consult a licensed adviser for decisions specific to your situation.