How compound interest works
Compound interest is interest earned on interest. The practical question is which balance the rate touches, and how often.
Simple interest and compound interest
Simple interest pays the rate on the original amount only. 100 at 12% simple interest is 12 of interest a year, every year, if nothing is added and nothing is withdrawn. Compound interest pays the rate on the original amount and on interest already earned. The second year starts from a larger base.
Monthly compounding slices the annual rate into twelve. A 12% nominal annual rate becomes 1% a month. Twelve turns of 1% are not 12%, because each turn applies to a slightly larger balance. The factor is (1.01)^12, about 1.1268. The effective annual rate is about 12.68%, not 12%.
Where a deposit sits
A starting balance compounds for every month. A deposit only compounds for the months after it arrives. That is why a long series of small deposits can hold more interest than the starting balance, and also why the first year looks slow. During the first year, the deposits have had little time to earn interest.
Sumslip's compound calculator assumes the deposit is the same every month and the rate never changes. An end-of-month deposit does not earn interest in the month it arrives. A beginning-of-month deposit does. With a 0% rate the timing does not matter, because nothing is earned either way.
What people compare by accident
A savings account, a bond yield, and a loan APR can all be called a rate. They are not the same promise. A savings calculator that adds deposits will not describe a loan, where the balance falls and nobody is adding a monthly savings deposit on top of the payment. Use the loan page for a falling balance.
Daily compounding, which some banks use, is a slightly higher effective rate than monthly compounding at the same nominal APR. If you are checking a bank that compounds daily, this monthly tool is a close sketch, not the statement. The direction of the error is small next to a rate you typed wrong by a full percent.
A careful way to use the result
Run the page at the rate you hope for, then again two points lower. If the plan only works at the hopeful rate, a lower return could leave you short of the goal. Taxes on interest, a missed month, and a fee are all reasons the real balance can come in lower.
The yearly table is there so you can see the interest line overtake the deposits. If you need a target date instead of a rate story, switch to the savings-goal calculator. It solves the deposit or the time instead of the ending balance.
Related tools
These figures are estimates you can recompute from the formula on the page. They are not a lender quote, a tax bill, a payroll statement, or financial advice.