Compound growth, in short
Compound interest pays you interest on your interest, not just your original deposit, so growth accelerates the longer money sits. But on the calculator's defaults — $10,000 at 7% for 10 years, monthly compounding — the $100-a-month contribution actually contributes more to the $37,405.09 final balance than the compounding does on its own: $17,308.48 from contributions versus $10,096.61 of pure interest growth on the untouched principal.
Key takeaways
- $10,000 at 7% for 10 years, monthly compounding, plus $100/month contributions grows to $37,405.09 — $15,405.09 of that is interest, 41% of the final balance.
- Strip out the $100/month contributions and the same $10,000 only reaches $20,096.61 over 10 years — the contributions added $17,308.48, more than the principal's own growth.
- The Rule of 72 estimates doubling time as 72 ÷ rate — at 7%, that's about 10.3 years, matching almost exactly the $10,000 → just over $20,000 no-contribution result above.
- Compounding frequency (monthly vs. annual vs. daily) makes a small difference — usually under 1% of the final balance — far less than whether you're contributing at all.
Compound interest vs. simple interest
Simple interest pays a fixed amount each period, always calculated on the original principal — $10,000 at 7% simple interest earns exactly $700 every year, forever. Compound interest recalculates each period on the new, larger balance, so year 10's interest is bigger than year 1's even though the rate never changed. That's the entire mechanism behind why long time horizons matter so much more than they first appear to.
How this calculator builds your balance year by year
Using the defaults — $10,000 principal, 7% annual rate, monthly compounding, $100/month contributions added at the end of each month, 10 years — the first three years look like this:
Year 1: starts $10,000 → +$1,200 contributions, +$762.16 interest → ends $11,962.16
Year 2: starts $11,962.16 → +$1,200 contributions, +$904.00 interest → ends $14,066.16
Year 3: starts $14,066.16 → +$1,200 contributions, +$1,056.10 interest → ends $16,322.27
Notice the interest earned climbs every year — $762.16, then $904.00, then $1,056.10 — even though the rate stays fixed at 7%. That's compounding at work: each year's interest is calculated on a balance that already includes every prior year's interest and contributions.
What contributions actually add
Run the same $10,000 at 7% for 10 years with zero added contributions, and it grows to $20,096.61 — a real result, purely from compounding. Add back the $100/month, and the final balance jumps to $37,405.09, a $17,308.48 difference. That's larger than the interest earned on the original $10,000 by itself, which is the practical lesson here: for most people building savings from a modest starting balance, the contribution habit does more work than the market does, at least in the early years.
The Rule of 72: a fast mental estimate
Divide 72 by your annual rate to estimate how many years it takes money to double, no calculator required. At 7%, that's 72 ÷ 7 ≈ 10.3 years — and sure enough, the no-contribution scenario above shows $10,000 growing to just over $20,000 in exactly 10 years at 7%. It's an approximation, not exact math, but accurate enough to sanity-check a projection at a glance.
Related calculators
For a fixed-term deposit instead of open-ended growth, see the CD calculator. The savings calculator and future value calculator cover related versions of this same growth math from slightly different angles.