What compound interest is
It’s earning interest on your interest. Each period the return is added to the balance and then earns its own return. Early on the effect barely shows; over decades it becomes most of the balance. Investing $300 a month at 6% for 20 years with $5,000 to start, you contribute $77,000 and end up with about $155,000: half of it is growth.
The formula
For a single deposit: FV = P × (1 + r)n. With regular contributions, each deposit compounds for the periods it has left. The calculator compounds monthly and assumes deposits at the end of each month.
Tax and inflation
The raw total is misleading unless you account for two things. Tax: in the US, long-term capital gains are taxed at 0%, 15% or 20% depending on income, while a Roth IRA or 401(k) shelters growth. And inflation: the calculator shows the balance in today’s money so you know what it will really buy.
Which return to use
Be conservative. High-yield savings accounts pay around 3–4% in the US in 2026; broad stock index funds have historically returned roughly 5–7% a year after inflation over long periods, with negative years along the way. In Latin America nominal rates are higher, but so is inflation: always use the return and inflation of the same currency.