Published 13 July 2026
Compound interest calculator
See how a starting balance and regular contributions grow over time with compounding.
How does compound interest work?
Compound interest is interest earned on interest. Each period, the account pays interest on the whole balance. That includes every dollar of interest already added. So the balance grows by a constant percentage, not a constant amount. Growth looks slow in the first years and steepens later. In the chart above, the balance curve bends upward while the contribution line stays straight. The widening gap between them is the compounding itself.
The calculator compounds once per deposit period. Monthly deposits mean monthly compounding, at the yearly rate divided by the number of periods in the year. Australian savings accounts usually credit interest monthly, so the monthly setting matches most real accounts. Deposits land at the end of each period. So the first deposit earns interest for almost the whole term, and the last one earns none. Timing matters less than most people expect. The timing rule is spelled out so the numbers can be reproduced exactly.
What does $10,000 plus $500 a month become?
On the calculator's defaults, the final balance is $92,961. This is a worked example, and every figure in this section describes it. The defaults: a $10,000 start, $500 added monthly, and 4.8 per cent a year over 10 years. Deposits supply $70,000 of that. Compounding adds the other $22,961 as interest.
The same plan over 20 years shows the compounding curve properly. The balance reaches $226,905. Of that, $96,905 is interest on $130,000 contributed. Doubling the time raised the final balance by $133,943. That is far more than double the ten-year growth. The later years compound on a much larger base.
The split between deposits and interest also flips with time. On the same settings over ten years:
- The monthly deposits alone, with no starting balance, reach $76,816.
- The $10,000 start alone, with no deposits, becomes $16,145.
Regular deposits do most of the work over short horizons. As the years add up, the accumulated balance and compounding take over.
What interest rate should the calculator use?
The rate on offer, if one is known. A projection is only as good as the rate put into it. For context, the RBA's June 2026 averages: banks' bonus savings accounts 4.8 per cent, online savings accounts 3.1 per cent, one-year term deposits 5.05 per cent1. The bonus-saver average assumes the bonus conditions are met each month. Base rates without the bonus sit far lower.
The spread matters more than it looks. Over the worked example's ten years:
- The one-year term deposit average, 5.05 per cent, earns $24,401 of interest.
- The online-saver average, 3.1 per cent, earns $13,864.
The gap is $10,538 on the same deposits (illustrative calculations at those two published averages).
What does the final balance buy?
A dollar ten years from now buys less than a dollar today. So the headline figure of any long projection overstates what the money will buy. The calculator's hero figure corrects for that. The worked example's $92,961 is worth $72,621 in today's dollars. That uses the default inflation assumption of 2.5 per cent a year. The default is the rate ASIC's calculator rules set for today's-dollars displays: the mid-point of the RBA's inflation target range. It can be edited like every other assumption.
The real-dollars view changes decisions more than it changes numbers. Nominal growth, the raw dollar gain before inflation, is $22,961 here. That looks like a fifth of the contributions. Measured in buying power, the gain is thinner. At rates below inflation, a balance can keep growing on paper while it shrinks in real terms. Long projections are best read in today's dollars first. That is why that figure leads the results.
What does the calculator leave out?
Three simplifications matter, and the first two both reduce real-world results:
- Tax is not modelled. Interest is generally taxable income. So the balance after tax lands below the projection, whatever the saver's tax rate. The higher the balance grows, the wider that gap gets.
- Fees and conditions are excluded. Bonus-rate accounts only pay their headline rate in months where the deposit and withdrawal conditions are met.
- The rate never moves. The projection holds one rate for the whole period. Real savings rates move with the cash rate, and real investment returns vary year to year. A run of varying returns ends at a different balance than a steady rate with the same average.
None of this makes the arithmetic less useful. It makes the inputs the honest place for caution. A projection run at a low, cautious rate, read in today's dollars, gives a floor that survives most surprises. The assumptions block above the results lists each of these simplifications, with the reason for every default.
Compound interest questions
How is compound interest calculated?
Each period, interest is added at the annual rate divided by the number of periods in the year. The next period's interest is then worked out on the new, larger balance. The full formula the calculator runs is disclosed beneath the results. That includes how regular contributions and the today's-dollars adjustment enter it.
What will $10,000 plus $500 a month be worth in 10 years?
At 4.8 per cent compounded monthly, $92,961 (worked example). That is $70,000 of contributions plus $22,961 of interest. Adjusted for inflation, it is worth $72,621 in today's dollars.
What interest rate is realistic for savings in 2026?
The RBA's June 2026 averages: banks' bonus savings accounts 4.8 per cent, online savers 3.1 per cent, one-year term deposits 5.05 per cent. An advertised rate for a specific account beats any average.
What does in today's dollars mean?
The final balance discounted by the assumed inflation rate. It then reads as buying power rather than a raw dollar amount. The default of 2.5 per cent a year is the rate ASIC's generic-calculator instrument sets for present-value displays. It can be edited.
Does compound interest get taxed?
Interest on savings is generally assessable income in Australia. It is taxed in the year it is credited, at the saver's marginal rate (the rate on their next dollar of income). The calculator shows pre-tax growth only, which is one of its stated limitations. The after-tax balance is lower.