Compound interest follows a simple idea: interest can itself earn interest. The effect may look small over a few months but can become substantial when capital remains invested for many years or regular contributions are added.
The Bethemesh compound interest calculator lets you test a scenario using initial principal, annual rate, term, compounding frequency and optional regular contributions. Its chart separates money actually invested from interest earned.
What is compound interest?
With compound interest, earned interest is added to the capital. During the next period, interest is therefore calculated not only on the original principal but on principal plus interest already earned.
For example, €10,000 invested at 5% per year with annual compounding and no new contribution grows to €10,500 after one year. During year two, 5% applies to €10,500 rather than €10,000, producing €525 of interest.
Repeated over many years, this difference creates the characteristic snowball effect of compounding.
Simulate your own compound interest.
Compound interest formula
Without regular contributions:
FV = PV × (1 + r/m)^(m×n)
where FV is future value, PV initial principal, r the annual interest rate as a decimal, m the number of compounding periods per year and n the term in years.
At 5%, r = 0.05. With monthly compounding, m = 12; over 20 years there are 12 × 20 = 240 compounding periods.
The formula assumes a constant rate. Real investments may have variable returns, fees and taxes, so a simulation is not a promise of return.
How do you calculate the interest actually earned?
With regular contributions:
Interest earned = Final value − Amount invested
The amount invested is the initial principal plus all contributions. If you start with €10,000 and add €200 each month for one year, you contribute another €2,400, so €12,400 has been invested before counting any interest.
This is why the calculator separates initial principal, cumulative contributions, total invested, interest earned and final value.
Effect of rate, time and contributions
A higher rate increases growth, but time is one of the strongest drivers of compounding. Each additional period gives previously earned interest another opportunity to earn interest.
Regular contributions work differently: they increase the amount of money invested. Earlier contributions generally have more time to compound than later ones.
Compounding frequency also matters. At the same nominal annual rate, more frequent compounding can slightly increase future value because interest is credited to the capital sooner.
Use the compound interest calculator to change one parameter at a time and see its effect.