Field note 10 / 24·5 min
Compounding, without the magic
Time matters because growth can build on previous growth. Assumptions matter just as much.
What is doing the growing?
With compound growth, a return left in place can itself earn a later return. Your own contributions are a separate part of the final balance. Seeing both parts helps you distinguish a saving habit from growth credited by an assumed rate.
Ask what the calculator assumes
A lump sum at a fixed annual rate compounded yearly grows as starting amount × (1 + rate) raised to the number of years. Recurring contributions require extra assumptions: when deposits happen and how often growth is credited. Monthly and annual compounding are not interchangeable.
A smooth curve is a mathematical illustration, not a market forecast. Investment returns vary, losses can occur, and fees, tax, and inflation change the result. Use the lab to compare scenarios, including lower rates. Read its timing assumptions before comparing it with another calculator. Increasing a plausible contribution is a different decision from increasing an imagined future return.
Two years, no new deposits
At an illustrative fixed 5% annual rate compounded yearly, 1,000 becomes 1,050 after year one and 1,102.50 after year two. The second year adds 52.50 because 5% is applied to 1,050. This ignores fees and tax and does not promise an investment return.
Illustrative numbers, in consistent units.Illustration: 100 units at a constant 6% annual return becomes about 134 after 5 years and 179 after 10 years. No contributions, fees, tax or inflation adjustment. Plant sizes illustrate this fixed example; actual returns are uncertain and investments can lose value.
One thing to try
In the lab, compare the same contribution at 0% and at an illustrative positive rate. Identify the amount you paid in.
Why does the second year add 52.50 in the example?
Source notes
These references support the general principles. Product terms and legal protections vary by country.
- Compound interest calculatorUS Securities and Exchange Commission — Investor.gov · Checked 2026-11-03
For general education. Examples do not include every fee, tax, personal circumstance or local rule, and are not individual advice.