At 7% a year compounded monthly, $10,000 grows to $40,387 in 20 years. Adding $200 a month for 30 years grows to $243,994, of which only $72,000 is money you put in.
Why time beats the starting amount
Compound interest pays interest on earlier interest. Early growth looks slow; later growth does the heavy lifting because the base it applies to keeps getting larger.
A single $10,000 deposit becomes $20,097 after 10 years, $40,387 after 20 and $81,165 after 30. The last ten years add more than the first twenty combined.
Regular contributions
Saving $200 a month at the same rate reaches $34,617 in 10 years, $104,185 in 20 and $243,994 in 30. Contributions make up $72,000 of the 30-year figure; the rest is growth.
A fixed 7% is an assumption for illustration. Real returns vary year to year and can be negative.
Run your own case
Use the compound interest calculator for a lump sum, or the retirement calculator to include monthly contributions. Change the rate, term and compounding to see how sensitive the result is.
| Years | $10,000 lump sum | $200 a month | Contributed |
|---|---|---|---|
| 10 | $20,097 | $34,617 | $24,000 |
| 20 | $40,387 | $104,185 | $48,000 |
| 30 | $81,165 | $243,994 | $72,000 |
FAQ
What is compound interest?+
Interest calculated on the original amount plus the interest already earned, so growth speeds up over time.
Is a 7% return guaranteed?+
No. The rate here is an assumption for illustration. Actual returns vary and are not guaranteed.