Compare simple and compound interest with recurring contributions, compounding frequency, estimated interest tax, and inflation-adjusted buying power.
Calculator
Interest Comparison
Compare ending balances, interest earned, and inflation-adjusted buying power.
Balance Components
Calculation Details
| Metric | Value | Note |
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Annual Comparison
| Period | Total contributed | Simple balance | Compound balance | Compound advantage |
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Simple interest versus compound interest
Simple interest is calculated only on the money contributed. Compound interest is calculated on contributions plus interest already credited. This calculator runs both methods with the same rate, deposits, timing, tax estimate, and duration so the difference is visible rather than theoretical.
simple balance = contributions + (contributed principal x annual rate x time invested)
compound growth = balance x effective monthly rate, repeated each month
Worked example
Start with $10,000, add $200 at the end of each month, and earn a 6% nominal annual rate compounded monthly for 10 years. The calculator compares the ending balances, total interest, and the extra amount created by earning interest on prior interest. Change the contribution timing to see why earlier deposits usually finish with more.
How recurring deposits are treated
Monthly contributions are added every month and annual contributions once per complete year. In the simple-interest comparison, each deposit earns simple interest only for the time it remains invested. In the compound comparison, each deposit can earn interest on both principal and previously credited interest. The SEC Investor.gov calculator also models starting principal, recurring deposits, time, rate, and compounding frequency.
Compounding frequency and effective yield
The nominal annual rate is converted to an effective monthly rate from the selected daily, weekly, monthly, quarterly, annual, or continuous frequency. More frequent compounding usually produces a higher effective annual yield when the nominal rate is unchanged. The Consumer Financial Protection Bureau explains that compound interest adds interest to principal, allowing future interest to be earned on a larger balance.
Tax and inflation assumptions
The optional tax rate is an illustration applied to positive interest as it accrues. It does not model tax brackets, account type, deductions, losses, or the timing rules on a tax return. Inflation converts each ending balance to estimated purchasing power in today's dollars. Rates, returns, and inflation are held constant and are not forecasts.
When to use each result
Simple interest is useful for understanding principal-only growth and some short-term arrangements. Compound interest is the better model when credited interest remains in an account. For a dedicated compound-only schedule, use the compound interest calculator. The FDIC compound-interest guide provides additional consumer examples.
Frequently asked questions
Do monthly deposits earn a full year of interest?
No. Each deposit begins earning from its selected beginning- or end-of-month timing, so later deposits have less time to grow.
Is the entered rate APY?
No. It is treated as a nominal annual rate. The results table shows the effective annual yield generated by the selected compounding frequency.
Can simple interest ever be higher?
With a positive rate and otherwise identical inputs, compounding is normally equal to or higher than simple interest. Negative rates, taxes, or unusual cash-flow timing can change that relationship.