Deposit Calculator – Compound Interest & Savings Growth
Calculate your deposit growth with compound interest over time
How to Use
- Enter your initial deposit amount
- Specify monthly deposit amount (optional)
- Enter the annual interest rate
- Choose the time period in years
- Select compound frequency (annually, quarterly, monthly, or daily)
- Click calculate to see your total savings growth
Understanding Compound Interest
Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods. It's often called 'interest on interest' and makes your money grow faster than simple interest.
The frequency of compounding affects your returns - the more frequent the compounding, the more interest you'll earn. Daily compounding will yield slightly more than monthly compounding, which yields more than annual compounding.
Effective Deposit Strategies
- Start early: The longer your money compounds, the more it grows
- Make regular deposits: Consistent monthly contributions significantly boost growth
- Choose higher interest rates: Even small rate differences compound dramatically over time
- Increase frequency: More frequent compounding periods accelerate growth
- Automate deposits: Set up automatic transfers to ensure consistency
- Avoid early withdrawals: Let your interest compound uninterrupted
The Compound Interest Formula
The formula for compound interest with regular deposits is: A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) - 1) / (r/n)]
Where: A = final amount, P = principal (initial deposit), r = annual interest rate (decimal), n = number of times interest compounds per year, t = time in years, PMT = regular payment amount.
Types of Deposit Accounts
- Savings accounts: Easy access with lower interest rates
- Money market accounts: Higher rates with minimum balance requirements
- Certificates of Deposit (CDs): Fixed terms with higher guaranteed rates
- High-yield savings accounts: Competitive online rates with fewer fees
- Retirement accounts: Tax-advantaged long-term growth (401k, IRA)
Frequently Asked Questions
- What's the difference between simple and compound interest?
- Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest. Compound interest grows your money significantly faster over time because you earn interest on your interest.
- How does compounding frequency affect my returns?
- More frequent compounding results in higher returns. Daily compounding will earn you more than monthly, which earns more than quarterly or annual compounding. However, the difference becomes less significant at lower interest rates.
- Should I make a large initial deposit or smaller regular deposits?
- Both strategies are beneficial. A larger initial deposit has more time to compound, but regular deposits create a consistent savings habit and reduce the impact of market timing. The ideal approach is to start with what you can afford and make regular contributions.
- Are the interest rates guaranteed?
- Interest rates can vary depending on the account type. CDs typically offer fixed rates for the term, while savings and money market account rates can fluctuate with market conditions. Always confirm rate terms with your financial institution.