FeaturedCompound Interest Explained Simply
Why money grows exponentially over time: the compounding effect explained step by step — with formula, examples and the three levers that really matter.
2026-07-0311 min read
Compound Interest Calculator
How much will your money become? Calculate the final balance from a lump sum and a monthly savings rate — including total interest, the compounding effect and a year-by-year growth chart.
100% freeNo data storedTransparent formula
Capital & Savings Rate
€
€
Interest & Duration
%
years
Final balance
€107,694
after 20 years · €200/month
Total deposits
€58,000
Total interest
€49,694
Effective return
3.1 %
p.a.
The compounding effect
This much of your interest comes purely from interest earned on interest already credited — the true compounding effect.
Interest on interest
€15,794
of total interest
32 %
Wealth build-up year by year
How your final balance breaks down
| Starting capital | €10,000 |
| Sum of savings rates | €48,000 |
| Total deposits | €58,000 |
| + Interest earned | €49,694 |
| of which interest on interest | €15,794 |
| Final balance | €107,694 |
Assumptions & notes
- The interest rate you enter is treated as constant over the whole period. In reality returns fluctuate — especially with equities or funds — from year to year.
- With yearly interest credit an effective monthly rate is used so that twelve months compound to exactly the annual rate you entered. With monthly credit the nominal monthly rate (annual rate ÷ 12) is used.
- The calculation ignores capital gains tax, solidarity surcharge, church tax, inflation and fees unless stated otherwise. Your real net result will therefore be lower.
- This calculator is for non-binding orientation and is not investment or tax advice. For an individual recommendation, consult an independent adviser.
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Guide: Compound Interest & Wealth Building
How the compounding effect works and how to make it work for you
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Frequently Asked Questions
Compound interest means that interest already credited itself earns further interest. In the first year only your deposited capital earns interest, but in the second year the interest from the first year earns interest too — and so on. As a result wealth does not grow linearly but exponentially: the longer the term, the more the growth accelerates. This is exactly what the calculator shows via the "interest on interest" figure.
The final balance consists of two parts: the compounded starting capital and the compounded savings plan. The starting capital grows with K0 × (1 + i)^n. The monthly savings rates are summed up via the annuity future-value formula r × ((1 + i)^n − 1) ÷ i, where i is the rate per period and n the number of periods. Both results are added together. At an interest rate of 0% the final balance is simply the sum of all deposits.
The interest-credit setting determines how often interest is added to the capital and thus starts earning interest itself. With monthly credit the nominal monthly rate (annual rate divided by twelve) is used — so the effective annual return is marginally above the nominal rate. With yearly credit the calculator uses an effective monthly rate so that twelve months compound to exactly the annual rate you entered. The difference is small at typical rates, but present.
The timing of the savings rate decides whether a rate is deposited at the start or the end of the period. In advance means a deposit at the start of the month — each rate then earns interest for one period longer. In arrears means a deposit at the end of the month, which is the standard for most savings plans. Saving in advance yields a slightly higher final balance with otherwise identical values, because the money starts working earlier.
No. The calculator shows the nominal gross result before taxes, fees and inflation. In Germany capital gains are generally subject to a flat tax (25% plus solidarity surcharge and, where applicable, church tax), with the saver's allowance exempting part of it. In addition, inflation erodes the purchasing power of the final balance. For a realistic net view you should subtract these factors separately. The calculator does not replace tax or investment advice.
The Rule of 72 is a rule of thumb: divide 72 by the interest rate in percent and you get roughly the number of years it takes a one-off invested amount to double. At 6% interest that's about twelve years, at 8% only nine. The rule works best in the range of roughly 4 to 12 percent and applies to lump sums without further deposits. For exact figures including a savings rate, use the calculator above.
Because the compounding effect is exponential, it unfolds its power above all over long periods. In the first years deposits dominate, but with each year the share of interest on interest grows. After two or three decades the interest earned can significantly exceed the deposits. Those who start early and stay invested for a long time therefore benefit disproportionately — even a few extra years change the final balance considerably. Move the duration in the calculator to see this effect for yourself.
As a rough growth projection, yes — you simply enter an expected average return as the interest rate. It's important to note, however, that equity and fund returns are not constant but fluctuate strongly; individual loss years are not reflected here. For a realistic savings plan with expense ratio, withdrawal phase and volatility, the <a href="/en/etf-savings-plan-calculator">ETF savings plan calculator</a> is the better choice. Use the compound interest calculator mainly to understand the principle and the order of magnitude.