Compound interest calculator

Compound interest is interest earned on both your original money and the interest already added to it. The longer the money stays invested or on deposit, and the more often interest is added, the larger that effect becomes. It is the basic arithmetic behind a savings account, a term deposit that compounds, a bond held to maturity, and the long-term growth of super and investment returns.

The Never Lose Interest compound interest calculator estimates a future balance from a starting amount, a regular contribution, an interest rate and a compounding frequency. This explainer shows the method, with worked figures you can check, and the things a simple calculator leaves out, such as tax, fees and inflation.

This is general information only. It is not personal advice or a prediction of returns, and it does not take into account your objectives, financial situation or needs. Consider speaking with a licensed financial adviser if you are making a decision about where to save or invest.

How does compound interest work?

Simple interest is calculated only on the starting amount, often called the principal. If you deposit $10,000 at 5% simple interest for five years, you earn $500 a year, or $2,500 in total, and finish with $12,500. That is the example the government's Moneysmart website uses for a person who receives interest only at the end of a five-year term.

Compound interest is calculated on the growing balance. Each time interest is added, the next calculation includes that interest. The same $10,000 at 5% a year, compounded monthly, grows to about $12,834 after five years. The extra $334 is interest on interest.

The difference looks small over a few years and much larger over longer periods, because each year's growth sits on a higher base. Moneysmart's published example, last updated 10 September 2026, is a $10,000 starting balance at 3% a year, compounded monthly:

• After 5 years, the balance is $11,616, so you would have earned $1,616 in interest.
• After 10 years, the balance is $13,494, so you would have earned $3,494 in interest.
• After 20 years, the balance is $18,208, so you would have earned $8,208 in interest.

The interest earned in the second decade is larger than the interest earned in the first, even though the rate never changed.

What is the compound interest formula?

For a single deposit, with no further contributions, the standard formula is:

A = P x (1 + r / n) ^ (n x t)

• A is the ending balance.
• P is the starting balance.
• r is the annual interest rate as a decimal. A 5% rate is 0.05.
• n is how many times interest is added each year. Monthly compounding uses 12. Annual compounding uses 1. Daily compounding uses 365.
• t is the number of years.

Moneysmart works through a $2,000 starting balance over 2 years at 5% a year, compounded monthly, as follows:

1. The monthly rate is 0.05 divided by 12, which is 0.00416667.
2. The number of periods is 2 times 12, which is 24.
3. The ending balance is $2,000 times (1 + 0.00416667) to the power of 24, which is $2,209.88.

If you also make regular deposits at the end of each period, you add the future value of those deposits:

Regular deposits = D x [((1 + i) ^ n - 1) / i]

Here D is the amount of each deposit, i is the interest rate per period, and n is the number of deposits. You then add that figure to the compounded starting balance. This matches the usual assumption that regular deposits are made at the end of the year, month, fortnight, week or day, which is also how Moneysmart's calculator treats them (last updated 27 October 2026).

A worked illustration, using that end-of-period method: you start with $10,000, add $500 at the end of each month, and earn 5% a year compounded monthly for 10 years. The starting $10,000 grows to about $16,470. The monthly deposits grow to about $77,641. The combined balance is about $94,111. Without any interest, the same contributions would have added up to $70,000. The extra $24,111 is compounding at work. These figures are rounded, and they assume the rate never changes.

How does compounding frequency change the result?

The more often interest is added, the more often you start earning interest on interest, for a given advertised annual rate. Monthly compounding will usually produce a slightly higher balance than annual compounding at the same nominal rate. Daily compounding will usually be slightly higher again. The gap is modest at low rates and short terms, and it adds up over long periods or at higher rates.

Two advertised rates are not always comparable if one compounds annually and the other compounds monthly. Savings accounts often express a comparison rate, or show how interest is calculated, for that reason. Read the product terms, including whether interest is calculated daily and credited monthly, and whether introductory rates later revert.

The Never Lose Interest calculator lets you choose a compounding frequency so you can see the difference. Use the same frequency as the account or investment you are comparing, rather than mixing them.

What does a compound interest calculator leave out?

A calculator is a model, not a forecast. Moneysmart says so plainly: results are only estimates, the actual amounts may be higher or lower, and the calculator cannot predict things that will affect your decision, such as changing interest rates. Its results are shown in future dollars, with no adjustment for inflation.

The main items a simple compounding estimate usually ignores are:

• A changing rate. Savings rates move. Investment returns vary from year to year, and can be negative. A constant 5% for 20 years is an illustration, not a promise.
• Inflation. $18,208 in 20 years' time will not buy what $18,208 buys today. The calculator shows a future dollar amount, not today's purchasing power.
• Tax. Interest on a savings account is generally assessable income in the year it is credited. Tax on that interest reduces what is left to compound, unless the money is in a tax-advantaged structure such as super, which has its own rules and preservation age. A pre-tax compounding figure will overstate what a personal saver keeps.
• Fees. Account fees, investment management fees and contributions tax in super all reduce the effective return.
• Timing. Deposits made at the start of a period compound for slightly longer than deposits made at the end. Missed or irregular contributions will also change the result.

If you are comparing a savings account with paying down a home loan, the after-tax interest you would earn, and the interest you would save on the loan, are the two figures to put side by side. The Never Lose Interest mortgage repayment explainer covers extra repayments and offset accounts, and the offset versus extra repayments versus investing guide compares those options in one place. Neither comparison, on its own, is personal advice about which option is better for you.

Frequently asked questions

What is the difference between compound interest and simple interest?

Simple interest is calculated only on the starting amount. Compound interest is calculated on the starting amount plus interest already earned. Over time, compounding produces a larger balance at the same headline rate, if the interest is added along the way rather than only at the end.

How do I calculate compound interest by hand?

For a lump sum, divide the annual rate by the number of compounding periods in the year, add 1, raise that figure to the total number of periods, and multiply by the starting balance. The $2,000 example above is a complete walk-through. For regular deposits, use a calculator or the future-value formula, because the arithmetic gets messy by hand.

Does compounding monthly always beat compounding annually?

At the same nominal annual rate, more frequent compounding usually produces a slightly higher balance. If the advertised rates are different, compare the actual dollar result, or a comparable rate, rather than the compounding label alone.

Are the calculator results adjusted for inflation or tax?

The Never Lose Interest calculator follows the same approach as Moneysmart in this respect: the results are future-dollar estimates, with no inflation adjustment, and they do not subtract tax or fees unless you build those into the rate you enter.

Can I use this for super or shares as well as a savings account?

You can use the same arithmetic as a rough illustration of compounding. Super and shares do not pay a fixed interest rate, fees and tax are different, and super generally cannot be withdrawn until a condition of release is met. Treat any such result as a sketch, not a projection of your fund or portfolio. The Never Lose Interest super calculator explainer covers contribution caps and official guides to how much super you may need.

General information warning

This article, and the Never Lose Interest compound interest calculator, are general information only. They are not personal financial product advice, a forecast of returns, or a recommendation to save or invest in a particular way. They do not take into account your objectives, financial situation or needs. Consider seeking advice from a licensed financial adviser before you make a decision.

Sources

• Moneysmart, Compound interest, last updated 10 September 2026, including the $10,000 at 3% examples, the $2,000 worked calculation, and the Lorenzo and Sophia comparison.
• Moneysmart, Compound interest calculator, last updated 27 October 2026, including the calculator assumptions and the statement that results are shown in future dollars with no inflation adjustment.

Last reviewed: November 2026.