How it is calculated
Each month the balance earns interest, then the monthly contribution is added at the end of the month. Yearly or daily compounding is converted to the equivalent monthly rate, so all three options use the same timeline.
Example
$10,000 to start, $500 a month, 5% a year compounded monthly, for 10 years:
- You put in $70,000
- Final balance about $94,111
- Interest earned about $24,111
Rule of 72
Divide 72 by the annual rate to estimate how many years it takes money to double without contributions: at 6%, about 12 years; at 8%, about 9 years.
What is not included
Inflation, account fees and changing rates are not included. Use the tax box if interest is taxed in your account type.