Compound Interest
Calculate compound growth from a starting amount, rate and term. Choose annual, quarterly, monthly or daily compounding and see yearly balances.
Total interest earned: €6,470.09 · Monthly · 10 years
| Year | Interest | Balance |
|---|---|---|
| 1 | €511.62 | €10,511.62 |
| 2 | €537.79 | €11,049.41 |
| 3 | €565.31 | €11,614.72 |
| 4 | €594.23 | €12,208.95 |
| 5 | €624.63 | €12,833.59 |
| 6 | €656.59 | €13,490.18 |
| 7 | €690.18 | €14,180.36 |
| 8 | €725.49 | €14,905.85 |
| 9 | €762.61 | €15,668.47 |
| 10 | €801.63 | €16,470.09 |
Monthly Budget Template
Plan a month, record what actually happened, and see the gap on every line.
How it works
In Excel or Google Sheets, calculate compound interest with =P*(1+rate/n)^(n*years), where n is the number of compounding periods per year — or with =FV(rate/n, n*years, 0, -P) using the built-in future value function.
Put principal, annual rate, years, and periods per year in four cells.
Compute =P*(1+rate/n)^(n*years) — or =FV(rate/n, n*years, 0, -P).
Note the minus sign on P in FV: Excel treats the deposit as money paid out.
Format the result as Currency and check the rate, term and compounding frequency in the formula.
What this does
Compound interest pays interest on previously earned interest, so a balance grows geometrically rather than linearly. The compounding frequency n matters: 5% compounded monthly yields slightly more than 5% compounded yearly, because each month's interest starts earning its own interest immediately. FV exists precisely for this; the explicit power formula shows what it is doing.
A worked example
With €10,000 at 5% compounded monthly for 10 years, =10000*(1+0.05/12)^(12*10) returns €16,470.09. Compounded only yearly, =10000*(1.05)^10 returns €16,288.95 — the extra €181 is the compounding-frequency effect. The equivalent built-in is =FV(0.05/12, 120, 0, -10000). Savings plans, loans, and investment projections all run on compound growth. Setting the formula up once with cell references lets you test scenarios by typing.
Common mistakes
- Using the annual rate per month without dividing by 12.
- Forgetting the minus sign on the present value in
FVand getting a negative result. - Comparing offers with different compounding frequencies by nominal rate alone — use
=EFFECT(rate, n)to get the effective annual rate. - Entering 5 instead of 0.05 (or 5%) for the rate, which explodes the result.
FAQ
What is the compound interest formula in Excel?
There is no COMPOUND function; use =P*(1+rate/n)^(n*years) or =FV(rate/n, n*years, 0, -P).
What does compounding frequency change?
How often interest is added to the balance. More frequent compounding yields a higher effective annual rate for the same nominal rate.
How do I add monthly deposits?
Use the pmt argument of FV: =FV(rate/12, months, -deposit, -P) for end-of-month deposits.