Watch wealth grow over years
Compound interest means that the interest earned in a given period is not paid out but added to the principal — and earns interest itself in the next period. This creates exponential growth: capital does not grow linearly but increasingly faster. Albert Einstein is famously quoted as calling compound interest the "eighth wonder of the world": "He who understands it earns it; he who doesn't, pays it." Whether Einstein really said this is historically unconfirmed — but the statement captures the principle perfectly. For long-term wealth building (retirement, ETF savings plans, investments), compound interest is the single most important lever.
The classic compound interest formula is:
K_n = K_0 · (1 + p/100)^nSuppose you start with an initial amount of 0 and contribute 200 per month to a broadly diversified ETF savings plan. At an average annual return of 6% (a typical long-term equity return after inflation and fees) the situation after 30 years looks like this:
Total contributions: 200 · 12 · 30 = 72,000
Final balance: around 201,000
Of which interest gains: approx. 129,000 — nearly twice the amount you contributed yourself!
At an 8% annual return you'd land at around 297,000 — more than four times your contributions. Try the numbers in the calculator above.
The compounding effect grows stronger over time — the final years contribute the most to the end balance. A classic example makes this clear:
Anna saves 200 per month for 10 years (age 25 to 35) and then leaves the money invested without further contributions.
Bert doesn't start until age 35 but saves 200 per month for a full 30 years, until age 65.
At 6% return, Anna ends up with roughly 200,000, even though she contributed only 24,000. Bert ends up with about 201,000 — having contributed 72,000. Anna ends up with nearly the same final balance — with only a third of the contributions! Time beats money. Starting early lets you build surprising sums with modest contributions.
With simple interest, interest is calculated each year only on the original principal — the interest earned does not earn further interest. With compound interest, the accrued interest itself earns interest. Example: 10,000 at 5% per year over 30 years:
| Year | Simple interest | Compound interest |
|---|---|---|
| Start | 10,000 | 10,000 |
| After 10 years | 15,000 | 16,289 |
| After 20 years | 20,000 | 26,533 |
| After 30 years | 25,000 | 43,219 |
An important trap: the final balance in 30 years is not equivalent to today's money. With average inflation of, say, 2% per year, the purchasing power of money halves roughly every 35 years. The key metric is the real interest rate — your nominal rate minus the inflation rate:
Real rate ≈ Nominal rate − InflationThis depends heavily on the asset class and the investment horizon. As a rough orientation based on historical data (e.g. MSCI World, S&P 500 since the 1970s):
Savings account / money market: 0–3% p.a., usually below inflation
Bonds / government bonds: 1–4% p.a.
Mixed funds / robo-advisors: 3–5% p.a.
Broadly diversified equity ETFs: long-term (20+ years) average about 5–7% p.a. after inflation, 7–9% before inflation
Important: past returns are no guarantee of future performance, and there is significant volatility — individual years can be strongly negative (e.g. 2008: −38% for the S&P 500). The long-term average return only holds over long horizons.
No. This calculator computes the gross return before taxes. In most countries, investment income is taxed at some rate (e.g. in Germany 25% capital gains tax plus solidarity surcharge ≈ 26–28% effective; in the US it depends on holding period and income; etc.). For a rough net estimate, you can reduce your nominal rate accordingly (e.g. 7% gross ≈ 5.1% net at a 27% tax rate). Tax rules differ significantly across countries, so a generic calculator cannot model them sensibly. Always consult a tax advisor for personal planning.
With annual compounding, interest is calculated once per year and added to the capital. With monthly compounding, interest is calculated each month — which yields a slightly higher final return because mid-year credited interest itself earns more interest. Example: 10,000 at 6% nominal over 1 year — annually: 10,600; monthly (6%/12 = 0.5% per month): 10,616.78. The difference becomes noticeable over decades. This calculator uses monthly compounding when a monthly contribution is set, matching common practice for ETF savings plans and insurance products.
No. All calculations happen entirely in your browser (JavaScript / Vue.js). No initial amounts, contributions, or interest rates are sent to or stored on a server. Once the page is loaded, you can use it offline.
No. This calculator only provides a mathematical calculation based on your inputs and is not a substitute for individual investment advice. Stock markets are subject to significant fluctuations, returns are not guaranteed, and individual factors such as taxes, risk tolerance, life situation, and investment horizon are not considered here. For concrete investment decisions, consult an independent fee-only advisor, your bank, or a consumer protection agency.
The crucial effect in compounding is non-linear: because capital grows exponentially, the absolute gain in late years is much larger than in early years. Starting with 10,000 EUR, contributing 200 EUR per month at 7% return, the balance grows from 10,000 to about 53,000 EUR in the first ten years — a gain of 43,000 EUR. In the last ten years of a 30-year horizon, it grows from roughly 195,000 to about 430,000 EUR — a gain of 235,000 EUR at the same monthly input. The biggest lever is the late stretch, not the early one. That is exactly why staying invested matters so much, and pulling out of a savings plan after 15 years is often economically the most expensive decision in a lifetime.
A second, often-overlooked point: inflation noticeably erodes the real value of the final amount. At 2% inflation over 30 years, one euro loses about 45% of its purchasing power. A nominal 430,000 EUR is worth roughly 237,000 EUR in today's purchasing power. At 4% inflation — as briefly seen in Europe in 2022/23 — only around 133,000 EUR remain. For long-term saving, the focus should therefore not be the nominal interest rate but the expected real rate (nominal minus inflation). Anyone modelling 5% nominal with 3% inflation should mentally re-run the projection at 2% to see the actual real wealth being built.
The following scenarios assume a constant return — reality fluctuates, but the orders of magnitude are meaningful.
The calculator uses a constant return — real markets fluctuate substantially. Between 2000 and 2010, an MSCI World investor saw returns near zero; between 2010 and 2020, well above the historical mean. If you begin the withdrawal phase in a bad decade, you can suffer heavy losses (sequence-of-returns risk). Also not modelled: taxes (Germany 26.375% capital gains tax on profits), fund fees (typical ETF TER 0.1–0.5% p.a.), the Vorabpauschale, the German saver's allowance of 1,000 EUR per year, and currency risk for non-EUR assets. The calculator is an educational tool, not a forecast. For concrete investment decisions involving larger sums, an independent fee-only advisor is worthwhile. This page is informational, not investment advice.
This calculator is intended for informational orientation only and does not replace professional financial or investment advice. The calculations shown are based on simplified assumptions (constant return, no taxes, no fees). Real market returns are volatile and not guaranteed. Securities and ETFs can lose significant value — total loss is possible. Before making any investment decision, you should consult an independent financial advisor or a consumer protection agency. The results are not legally binding and do not constitute investment, tax, or legal advice.