How much will your money grow — and how much should you save to reach your goal?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which only earns on the original amount, compound interest causes your money to grow exponentially over time. For example, $10,000 at 7% compounded monthly grows to about $40,387 in 20 years — more than quadrupling — because each month's interest earns interest in all following months.

The Rule of 72 is a quick mental math shortcut to estimate how long it takes for an investment to double. Divide 72 by the annual interest rate to get the approximate doubling time in years. At 7% annual return, your money doubles in roughly 72 / 7 = 10.3 years. At 10%, it doubles in about 7.2 years. This rule is most accurate for rates between 4% and 12% and gives a fast sanity check without needing a calculator.

Yes, but the difference is smaller than most people expect. For a $10,000 deposit at 7% over 20 years: annual compounding yields $38,697, monthly compounding yields $40,387, and daily compounding yields $40,552. The jump from annual to monthly is meaningful (about $1,690 more), but monthly to daily adds only $165. Most savings accounts compound daily, while investment return projections typically use monthly or annual compounding.

If you have the lump sum available, investing it all upfront generally produces a higher final value because the money has more time to compound. However, most people build wealth through regular monthly contributions because they do not have a large lump sum available. The key advantage of monthly contributions is that they create a savings habit and benefit from dollar-cost averaging in volatile markets. The best approach for most people is to invest any available lump sum immediately and also set up automatic monthly contributions.

Inflation erodes the purchasing power of future dollars. If your investment earns 7% annually but inflation averages 3%, your real (inflation-adjusted) return is roughly 4%. A projection showing $500,000 in 30 years means that money will buy what approximately $200,000-$250,000 buys today (assuming 2.5-3% average inflation). To account for this, you can either use real returns (subtract inflation from your rate) or increase your savings target to reflect future dollars. This calculator uses nominal returns and does not adjust for inflation.