Monthly Compound Interest Calculator
Calculate how your savings grow with monthly compounding. Include optional monthly deposits to see the power of consistent investing.
Result
- Initial Principal
- $0.00
- Monthly Deposit
- $0.00
- Annual Interest Rate
- 0%
- Time Period
- 0 months (0 years)
- Total Deposits
- $0.00
- Total Interest Earned
- $0.00
- Final Balance
- $0.00
Formula & Guide
Formula
FV
Future Value (Principal Only)
FV = P(1 + r/12)^n
Principal with monthly compounding
FV
Future Value (With Deposits)
FV = P(1+r)^n + PMT×[(1+r)^n-1]/r
Including regular monthly deposits
Formula Variables
FV
Future Value
The final balance including all interest earned
P
Principal
Initial deposit amount
PMT
Payment
Regular monthly deposit amount
r
Monthly Rate
Annual rate ÷ 12 (as decimal)
n
Periods
Total number of months
Example Scenario
Initial Principal
$5,000
Monthly Deposit
$200
Annual Rate
6%
Time Period
24 months
1
Calculate Monthly Rate
- Monthly Rate = 6% ÷ 12 = 0.5% = 0.005
2
Calculate Month by Month
- Month 1: $5,000 × 1.005 + $200 = $5,225
- Month 2: $5,225 × 1.005 + $200 = $5,451.13
- ... continuing for 24 months
3
Final Result
- Total Deposits: $9,800
- Interest Earned: $514.73
Additional Examples
Savings Account
Principal: $1,000
Monthly Deposit: $100
Rate: 4% annual
Time: 36 months
Total Deposits
$4,600
Interest Earned
$296.47
Final Balance
$4,896.47
High-Yield Savings
Principal: $10,000
Monthly Deposit: $500
Rate: 5% annual
Time: 60 months
Total Deposits
$40,000
Interest Earned
$6,449.18
Final Balance
$46,449.18
Benefits of Monthly Compounding
More Frequent Growth
Interest compounds 12 times per year instead of once, leading to higher effective returns.
Perfect for Savings
Most savings accounts and CDs use monthly compounding, making this calculator ideal for planning.
Predictable Schedule
Interest is added on a fixed monthly schedule, making it easy to track and plan your savings.
Combines with Deposits
Monthly compounding pairs perfectly with monthly deposits for maximum growth potential.
Important Notes
- Monthly compounding yields higher returns than annual compounding at the same interest rate.
- APY (Annual Percentage Yield) accounts for compounding and shows your true annual return.
- Starting with even a small principal and adding monthly deposits can build significant wealth over time.
- Most banks quote APR but compound monthly, so actual returns are slightly higher than the stated rate.
Frequently Asked Questions
Common questions about monthly compound interest.
Monthly compound interest means interest is calculated and added to your balance every month. Each month's interest is calculated on the previous month's balance (principal + accumulated interest). This is the most common compounding frequency for savings accounts and CDs.
Monthly deposits significantly accelerate wealth building. Each deposit immediately starts earning compound interest. The earlier deposits have more time to compound, making consistent monthly investing one of the most powerful wealth-building strategies.
Monthly compounding adds interest 12 times per year instead of once. This means you earn 'interest on interest' more frequently. For example, $10,000 at 6% annual rate earns $618.31 with monthly compounding vs $600 with annual compounding after one year.
Divide the annual interest rate (APR) by 12 to get the monthly rate. For example, a 6% APR gives a monthly rate of 0.5% (6% ÷ 12 = 0.5%). Most savings accounts quote annual rates, so this conversion is often necessary.
APY (Annual Percentage Yield) is the effective annual rate accounting for compounding. With monthly compounding, APY is higher than APR. For example, 6% APR with monthly compounding equals about 6.17% APY. APY tells you your true annual return.