~$ finance/compound-interest
Compound interest 📈
The eighth wonder, without the mystique: a starting amount, a monthly deposit, a rate, and time. This shows what the pile becomes, how much of it you actually put in, and the year the interest quietly starts out-earning your deposits.
Ends at —
—
The pile
Crunching…
Final balance
—
You put in
—
Interest earned
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In today’s dollars
—
The wedge
the gap between the lines is compounding
Balance
What you put in
The mechanics
effective rate —
Money doubles every
—
Interest out-earns deposits
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By the end it earns
—
If the rate were different
same deposits, same yearsHow this works
- Deposits land at the end of each month, whatever the compounding frequency. The frequency you pick is converted to its effective annual rate — 8.8% compounded monthly is 9.16% effective — and applied in monthly steps, which is why daily vs. yearly moves the answer less than people expect.
- The doubling time is the real one, ln(2) ÷ ln(1 + rate) — the rule of 72 is the party-trick approximation of it.
- The overtake year is the point of no return. Once a year’s interest exceeds a year’s deposits, the pile grows more from being a pile than from your effort. Everything before that year is you; everything after is momentum.
- The today’s-dollars line deflates the final balance by your inflation figure, because “a million dollars” in 20 years buys a fair bit less than it does today.
- Tax isn’t modelled. Interest on savings is taxed at your marginal rate every year, which drags the compounding badly; shares and super each have their own treatment. The take-home and rentvest calculators carry the tax detail — this one shows the raw machine.
- A steady rate is a simplification. Real returns arrive lumpy; the average conceals drawdowns your nerves have to survive.
General information only, not financial advice — I’m a hacker, not a financial adviser. Your numbers stay in your browser.