What Is Compound Interest?
Compound interest is interest earned on both the original amount and the interest already added to that amount. An example on this page uses $200 monthly contributions for 25 years at 7%, estimating about $173,465. Of that estimate, $62,000 is contributions and $111,465 is interest (64% of the ending balance). The calculator credits the period rate to the current balance, then adds that period's contribution, so later interest is earned on both deposits and previously credited interest. The calculator is for educational scenario comparison, not personalized advice.
Scenario snapshot
Preloaded assumptions and the estimated result. The calculator below can change every input.
| Initial investment | $2,000 |
|---|---|
| Monthly contribution | $200 |
| Time horizon | 25 years |
| Assumed annual return | 7% |
| Compounding | monthly |
| Estimated ending balance | $173,465 |
| Total contributions | $62,000 |
| Estimated interest | $111,465 |
after 25 years • 7.0% return • $200.00/month • $2,000.00 initial
The comparison below estimates the impact of delaying the start date, using the same assumptions and timeline.
Stress-test growth assumptions in the Scenario Lab to see a range of outcomes and potential risk.
Open Scenario LabWhat is compound interest?
Compound interest means the interest added in one period becomes part of the balance that can earn interest in the next period. The example on this page estimates $173,465 after 25 years at 7%, with $62,000 contributed and $111,465 of interest. That split is the practical illustration: deposits create the base, and compounding can increase the share that comes from interest as time extends.
Why do later years often show more interest than contributions?
Later years can show more interest than deposits because each new period applies the 7% assumed rate to a larger balance. In this example, interest is about 64% of the $173,465 estimate. If the horizon is shortened in the calculator, the interest share usually falls; if it is lengthened, the interest share usually rises, assuming a positive rate.
How can a calculator illustrate compounding?
The calculator makes the same definitions inspectable under different assumptions: contribution, years, return rate, and compounding frequency. The preloaded example estimates $173,465 after 25 years at 7%. The outputs remain educational estimates for research, not predictions of future performance.
Summary
The definitions above are illustrated by an estimated $173,465 balance after 25 years at 7%. The calculator and related scenario pages are for exploring how contributions, time, and assumed returns interact. The material is informational research, not personalized investment advice.