Compound Interest Calculator

How Compound Interest Works

Compound interest is interest earned on your interest. Each period, growth is calculated on your whole balance — your original savings plus everything earned so far — so the balance grows faster and faster the longer it runs. It's the single most powerful force in long-term saving, and the reason a modest amount saved consistently from your twenties can outgrow a much larger amount started in your forties. Time, not the size of the deposit, does most of the heavy lifting.

The Formula (in Plain Terms)

For a starting amount plus regular contributions, the future value is:

FV = P (1 + i)ⁿ + PMT × [ ((1 + i)ⁿ − 1) ÷ i ]

Where P is your starting amount, PMT is the contribution each period, i is the interest rate per period (annual rate ÷ how often it compounds), and n is the total number of periods. The first part grows your lump sum; the second part grows your stream of monthly contributions. The calculator above runs this for every year so you can see the curve, not just the end number.

A Worked Example

Say you start with R10,000, add R1,000 a month, and earn 10% a year compounded monthly. After 20 years you'd have contributed R250,000 of your own money — but the account would be worth roughly R832,000. More than R580,000 of that is pure growth: your money has multiplied 3.3 times. Stretch the same plan to 30 years and the growth portion balloons further, because the last decade compounds on the largest balance. That widening gap between the dashed "contributed" line and the solid "total value" line on the chart is compounding doing its work.

Saving Tax-Free in South Africa

South Africans can shelter compound growth from tax using a tax-free savings account (TFSA), which allows up to R36,000 in contributions per year and R500,000 over a lifetime. Inside a TFSA, none of the interest, dividends or capital growth is ever taxed — which, over decades of compounding, can be worth a great deal more than the headline limits suggest, because tax never eats into the balance that's compounding. For most long-term savers, filling the TFSA allowance first is one of the simplest high-value moves available.

Related tools: see all savings calculators, or if you're paying off debt rather than saving, the debt repayment calculator shows how fast extra payments clear what you owe.