What is the difference between simple and compound interest?

Simple interest is charged or earned only on the original principal: $1,000 at 8% earns $80 every year, forever. Compound interest is earned on principal plus all previously accumulated interest: the same $1,000 earns $80 in year one, then $86.40 in year two — interest on interest — and the gap widens every year. Almost all real savings and loans compound.

What does 'contribute at the beginning' change?

A contribution made at the beginning of a period earns interest for that whole period; one made at the end earns nothing until the next. Over years of regular contributions, beginning-of-period deposits end up roughly one period's interest ahead on every deposit — a few hundred to a few thousand dollars on long horizons.

How do tax and inflation change the result?

Tax is skimmed from the interest as it accrues, which quietly lowers the compounding rate: $10,000 at 7% for 20 years grows to $38,696.84 untaxed but only $27,610.04 at a 25% tax rate. Inflation does not change the balance — it changes what the balance buys; this calculator shows the ending balance's buying power in today's dollars at your inflation rate.

How is this different from the Compound Interest Calculator?

They share the same compounding engine. This Interest Calculator adds an annual contribution alongside the monthly one, a beginning/end-of-period switch, a tax rate applied to interest as it accrues, and an inflation-adjusted buying-power figure — the fuller planning version of the same math.

Interest Calculator

Compound growth of a lump sum and/or regular contributions — with the two forces most calculators hide: tax on the interest, and what inflation does to the result.

Initial Investment

Annual Contribution

Monthly Contribution

Contribute at the

beginning end

…of each compounding period. Beginning deposits earn interest one period sooner.

Interest Rate

Compound

Investment Length

years

Second box is extra months (0–11).

Optional — Reality Checks

Tax Rate

Your marginal tax rate on interest income. Enter 0 if it isn't taxed.

Inflation Rate

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Interest: The Price of Money, Working For You or Against You

Interest is compensation for the use of money — paid by a borrower to a lender, or by a bank to a saver — quoted as a percentage of the principal. It is the engine inside nearly every financial instrument you will ever touch, and it comes in two species that behave very differently over time. This calculator handles the species that matters in real life — compound interest — with contributions, and with the tax and inflation adjustments that decide what growth is actually worth.

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Simple interest: the straight line

Simple interest is computed only on the original principal: interest = principal × rate × time. Borrow $1,000 at 8% simple and you owe $80 of interest after one year — $1,080 in total — and exactly $80 more for every additional year: $1,160 after two. It is clean, predictable, and rare: some short-term notes and a few bonds use it, but savings accounts, credit cards, mortgages, and investments essentially never do. When everyday speech says "interest," it almost always means the compounding kind.

Compound interest: interest on interest

Compounding adds each period's interest to the principal, so the next period's interest is earned on a larger base. The same $1,000 at 8%, compounded annually, reaches $1,080 after year one, then earns 8% on $1,080 in year two — $86.40, not $80 — landing at $1,166.40. That extra $6.40 looks trivial; stretched over decades it is the entire story of long-term saving, and of long-term debt. Frequency sharpens it: at a 20% rate, annual versus daily versus continuous compounding barely differ in year one and steadily diverge after, with continuous compounding — the mathematical limit — always on top. The honest summary of a rate is therefore its effective annual yield (APY), which folds the frequency in; this calculator's engine works in exactly those effective terms, so the schedule below is right for every frequency you can select.

The Rule of 72

For a ballpark doubling time, divide 72 by the rate: at 8%, money doubles in about 72 ÷ 8 = 9 years; at 6%, about 12; at 10%, about 7.2. The rule is sharpest between roughly 6% and 10% and serviceable well beyond. Run it in reverse, too — at 3% inflation, prices double (and idle cash halves in buying power) in about 24 years, which is the quiet argument for investing rather than hoarding.

Fixed vs. floating rates

A fixed rate is set at signing and never moves — this calculator assumes one. A floating rate rides on a benchmark: in the U.S., the Federal Reserve's federal funds rate for policy, and SOFR (the Secured Overnight Financing Rate, which replaced LIBOR after its 2023 phase-out) for much commercial lending. Lenders price a margin above the benchmark as profit; deposit rates usually sit a margin below it. When benchmarks move, floating-rate borrowers and savers feel it within a period or two — the trade for the lower starting rates floating products often offer.

Contributions, taxes, and inflation — the three adjustments

Contributions are where habits beat windfalls: a modest monthly deposit, compounded for decades, routinely outgrows a one-time lump sum — and deposits made at the beginning of each period finish ahead of identical deposits at the end, because each one compounds for one extra period. Taxes are skimmed as interest accrues — savings accounts, CDs, and most bonds pay taxable interest (U.S. Treasury interest escapes state and local tax, but not federal). The drag is larger than intuition suggests: $10,000 at 7% for 20 years becomes $38,696.84 untaxed, but only $27,610.04 at a 25% marginal rate — the tax doesn't just take a quarter of the interest, it takes a quarter of every future year's compounding on that interest too. Inflation is the third hand in your pocket: U.S. prices have risen about 3% a year over the long run (the S&P 500 has returned roughly 10% nominal over the same span), so a taxed saver needs something like 4%+ just to stand still in real terms — which is precisely the "buying power" figure this calculator reports alongside the nominal balance. For the deeper dive on prices themselves, see the inflation calculator, and for the same engine without the tax and timing options, the compound interest calculator.

FAQ

Simple or compound — which does this use?

Compound, at your chosen frequency from annually to continuously — the way real accounts work.

Beginning or end of period?

If your deposit lands on the 1st, choose beginning; if it lands after interest is credited, choose end. Beginning finishes one period's interest ahead per deposit.

Why is the taxed result so much smaller?

Because tax is taken every period, the amount left compounding is smaller every year after. $10,000 at 7% over 20 years: $38,696.84 untaxed vs. $27,610.04 at 25% tax.

What inflation rate should I use?

3% is the U.S. long-run average and the default here. Use 0 to see nominal results only.

Disclaimer: This calculator provides estimates for educational purposes only and does not constitute financial or tax advice. It assumes a fixed rate and a constant tax rate applied to interest as it accrues; individual tax treatment varies.