How compound interest works
Compound interest means interest is added to your balance and future interest is then calculated on the larger balance. Over long periods, this can create a noticeable acceleration in growth.
Formula
For a single starting balance, the common formula is A = P(1 + r/n)nt, where P is the principal, r is the annual rate, n is the number of compounding periods per year and t is the number of years.
Example scenarios
$10,000 at 5%Useful for a conservative long-term scenario
$10,000 at 7%Shows how a higher return changes long-term growth
+$200/monthIllustrates the impact of regular contributions
Why regular contributions matter
Adding money consistently can have a large effect because each new contribution can also begin earning returns. The annual table above separates contributions from estimated interest so you can see where growth comes from.
Results are estimates and do not include taxes, fees or market volatility.