Compound Interest Calculator

By Pam O’Brien | Updated Sept 6, 2024

Use our compound interest calculator to see how your savings can grow faster by earning interest on both your initial deposit and the accumulated interest over time.

*Actual interest credited by your financial institution may vary based on institution-specific calculation methodology.

Calculator Definitions

Before using a compound interest calculator, it’s important to understand the different metrics you’ll need to fill in. They are:

• Initial Deposit: The amount of money you first put into your interest earning account. It represents the starting point of your investment journey. The larger it is, the more you can earn from interest. In addition, some financial institutions require a specific dollar amount for your first deposit to open the account or secure a higher interest rate.

• Monthly Contribution: The amount of money you expect to add to the account each month.

• Time to Grow: The number of years and months you plan to save the money in the account so it can grow

• Expected Rate of Return: What you estimate the interest rate for the account will be.

• Compound Frequency: The number of times per year that the interest will be calculated and compounded on the account. Depending on the account, interest might be compounded daily, monthly, quarterly, or annually, for instance.

• Interest Earned: The total amount of interest that accumulates on your initial deposit and any additional contributions over the specified time period. You can calculate this figure with the estimated rate of return, the compounding frequency, and the time elapsed. Higher interest rates create more earnings.

• Total Contributions: Total contributions represent the sum of your initial deposit and all the monthly contributions made over the specified time period. It gives you a clear picture of how much money you have contributed to the account.

What Is Compound Interest?

There are key differences between compound interest vs. simple interest. Simple interest is the interest that accrues on an initial amount of money deposited in a savings account (aka the principal). If you multiply the principal by the interest rate earned on the money over a year, you get the simple interest amount. If you deposited $1,000 in a savings account that has an interest rate of 1%, in a year you would earn $10 in simple interest.

By comparison, compound interest is a method in which interest is added to the principal and interest is earned on the principal plus that added interest. For example, if you deposited $1,000 in a savings account and it earned $10 of interest in the first month, you’d have $1,010 in the account. (That’s the same amount of money it took you a full year to earn with simple interest.) For the next month you would earn interest on that new higher amount of money. As your savings continued to grow monthly, you would be earning interest on the new higher amounts.

With compound interest, your money can grow faster over time. And the sooner you begin saving with compound interest, the longer you can benefit.

Dive Deeper: Simple vs Compound Interest

Compound Interest Formula

There is a specific formula to determine compound interest. The formula is:

A = P(1 + rn)^n*t

Where:

• A represents the final amount of money you’ll get.

• P stands for the principal, or original amount deposited.

• r is the interest rate expressed as a decimal, such as 0.3 for 3% and 0.5 for 5%.

• n is the number of times the interest compounds each year.

• t is the number of years the interest will be compounding.

How often interest gets compounded (the “n” above) is instrumental. If the interest is compounded monthly instead of annually, for example, your savings may grow much faster. That’s because the more often your money compounds, generally, the more potential it has to grow.

Compound Interest Example Calculation

To calculate compound interest, you can use the compound interest formula above. The formula is typically used to calculate compound interest based on the principal (the amount of money you initially deposited), the interest rate, number of times the interest compounds per year, and the length of time the interest will be compounding.

To see how compound interest works, in the example below, $5,000 is deposited in a savings account in which the 5% interest is compounded monthly for 10 years. Here’s what that looks like:

Year	Account Balance	Interest Earned (5%)	New Balance
1	$5,000.00	$255.81	$5,255.81
2	$5,255.81	$268.90	$5,524.71
3	$5,524.71	$282.65	$5,807.36
4	$5,807.36	$297.12	$6,104.48
5	$6,104.48	$312.32	$6,416.79
6	$6,416.79	$328.30	$6,745.09
7	$6,745.09	$345.09	$7,090.18
8	$7,090.18	$362.75	$7,452.93
9	$7,452.93	$381.31	$7,834.23
10	$7,834.23	$400.81	$8,235.05

At the end of 10 years, your savings will be worth $8,235.05 — thanks to the $3,235.05 of compound interest you earned.

As you can see, the amounts can add up quickly. You can use a compound interest calculator to plug in different initial savings amounts, interest rates, and length of time the interest will be compounded.

Learn more about saving:

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¹

SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

² Our account fee policy is subject to change at any time.

^† †

The following describes the terms that apply to participation in the SoFi Checking and Savings direct deposit promotion (the “Direct Deposit Promotion”) offered by SoFi Bank, N.A, Member FDIC (“SoFi”).

Eligible Participants: All new and existing members without any history of direct deposit transactions into their SoFi Checking and Savings account are eligible for the Direct Deposit Promotion. Members who previously enrolled in direct deposit into either SoFi Money or SoFi Checking and Savings, whether currently still enrolled or not, do not qualify for this Direct Deposit Promotion. Bonuses are limited to one per SoFi Checking and Savings account. In the case of a joint account, only the primary account holder (the member who signed up first) is eligible for a bonus. Member must have an open SoFi Checking account in good standing at the time of the bonus payment.

Promotion Period: The Direct Deposit Promotion will begin on 12/7/2023 at 12:01AM ET and end on 12/31/24 at 11:59PM ET.

Bonus Terms: In order to qualify for eligibility for a bonus, SoFi must receive at least one Direct Deposit (as defined below) from an Eligible Participant, the first of which must be before the end of the Promotion Period. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network. Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g. IRS tax refunds), do not constitute Direct Deposit activity. SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity to determine eligibility and may require additional documentation to complete this verification. The amount of the bonus, if any, will be calculated during the Direct Deposit Bonus Period as described and defined below.

Direct Deposit Bonus Period: The Direct Deposit Bonus Period begins when SoFi receives a Direct Deposit of $1 or more within the Promotion Period and ends 25 calendar days later (the “Direct Deposit Bonus Period”). For the avoidance of doubt, the Direct Deposit Bonus Period shall not extend beyond the Promotion Period. The bonus amount will vary based on the total amount of Direct Deposits received during the Direct Deposit Bonus Period. Once the Direct Deposit Bonus Period has elapsed, SoFi will determine if you have met the offer requirements and will deposit any earned bonus into your checking account within seven (7) business days. For example, if SoFi receives between $1,000.00 and $4,999.99 in Direct Deposits during the Direct Deposit Bonus Period, you will receive a one-time cash bonus of $50. A member may only qualify for one bonus tier and will not be eligible for future bonus payments if Direct Deposits subsequently increase after the Direct Deposit Bonus Period.

Total Direct Deposit Amount in Direct Deposit Bonus Period	Cash Bonus Tier
$1.00 - $999.99	$0
$1,000.00 - $4,999.99	$50
$5,000.00 or more	$300

Bonus Payment Timeline: SoFi will credit members who meet qualification criteria within seven (7) business days of the end of the Direct Deposit Bonus Period.

Bonuses are considered miscellaneous income and may be reportable to the IRS on Form 1099-MISC (or Form 1042-S, if applicable). SoFi reserves the right to exclude any Members from participating in the Direct Deposit Promotion for any reason, including suspected fraud, misuse, or if suspicious activities are observed. SoFi also reserves the right to stop or change the Direct Deposit Promotion at any time.

SoFi members with Direct Deposit can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the 4.20% APY for savings (including Vaults). Members without Direct Deposit will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN1023016

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