How can a starting balance and regular contributions grow with compounding?
Compound growth earns returns on the original balance and on prior returns. Regular contributions create a second stream of growth, so the timing and frequency represented by the formula matter.
Compounding each period at a converted rate
i = Annual rate ÷ 100 ÷ Compounds per year; N = Compounds per year × Years; Contribution per period = Monthly contribution × 12 ÷ Compounds per yearFuture value = Principal × (1 + i)^N + Contribution per period × [((1 + i)^N − 1) ÷ i]; when i = 0, Future value = Principal + (Contribution per period × N)A balance built from deposits and growth
The default projection combines an initial balance, repeated contribution, annual rate and term. It separates money contributed from growth produced by the entered rate.
Illustrative inputs; currency amounts below use USD. Rates and prices are assumptions, not live quotes.
- Starting amount
- $10,000.00
- Monthly contribution
- $250.00
- Annual return
- 7%
- Years
- 20
- Compounds per year
- 12
Step-by-step calculation
- Periodic rate = 7 ÷ 100 ÷ 12 = 0.005833; periods = 12 × 20 = 240.
- End-of-period contribution = 250 × 12 ÷ 12 = 250. Apply the future-value formula above to the principal and this payment stream.
- Future balance = 170,619.053446; money deposited = 10,000 + 250 × 12 × 20 = 70,000. Interest = 170,619.053446 − 70,000 = 100,619.053446.
Intermediate figures are rounded for reading. Results use the full calculation precision.
Contributions versus earned growth
Final balance alone can hide how much came from deposits. Compare total contributions with interest or growth to understand when compounding begins to contribute more of the ending value.
Rate and contribution timing
An annual rate must be converted consistently to the calculator’s compounding period. Applying the full annual percentage every month dramatically overstates growth.
- The annual rate and contribution stay constant.
- Contributions occur at the timing specified by the formula.
- Tax, fees, withdrawals and variable returns are excluded.
Calculations related to compound interest
The following tools examine neighbouring parts of the same calculation without changing the inputs or assumptions used above.
References
Sources and conventions
- SEC Investor.gov: compound growth
A comparison tool for compound growth assumptions, not a promised investment return.
Quick answers
Frequently asked questions
When are contributions assumed to be made?
They are treated as equal contributions added once per compounding period after converting the monthly amount to that frequency.
What happens if the return is zero?
The future value becomes the starting amount plus all regular contributions.
Are taxes and account fees included?
No. Reduce the annual return or adjust the inputs if you want to model those effects.
Calculation method and limitations · Report an error
Educational content only. This guide is not financial advice.