PakFinanceGuidesInterest on interest
Compound interest means you earn returns on your original money and on the returns already added. Over long periods this snowball effect becomes the biggest part of your growth.
How it is calculated
With a monthly rate r and n months, the final balance is: start x (1 + r)^n + monthly deposit x ((1 + r)^n - 1) / r. This calculator compounds monthly and also shows total deposits and interest earned.
An example
Start with $5,000, add $300 every month and earn 7% a year for 20 years. You would deposit $77,000 in total and end with about $176,000. Roughly $99,000 of that is growth rather than your own money. Real returns vary and are never guaranteed.
The rule of 72
Divide 72 by your annual rate to estimate how long money takes to double. At 7% that is about ten years. The tool shows this figure so you can sense-check the result.
Using it wisely
Try lower rates to stress-test your plan. Fees and taxes reduce real returns, and inflation reduces what the money can buy, so pair this with the inflation calculator.
Frequently asked questions
What rate should I use?
Use a cautious figure. Long-run stock returns have varied widely, and savings accounts pay far less.
Does starting earlier matter?
Yes. Time is the most powerful input, which is why small early deposits can beat large late ones.
Are taxes included?
No. Tax rules differ by country and account type.