Question 1

How does adding a monthly contribution change the math from simple compound interest?

Accepted Answer

Textbook compound interest projects a single lump sum forward. This calculator instead compounds the balance every month and then adds your monthly contribution, repeating for the full term — the same mechanics behind a SIP (systematic investment plan) or a 401(k) with regular payroll contributions. Small, regular contributions compounding for decades are usually what drives the bulk of the final balance, not the size of the initial deposit.

Question 2

What return rate should I use?

Accepted Answer

That depends entirely on what you're invested in and is not something this tool can tell you. A savings account might return 1–4%, a diversified stock index fund has historically averaged roughly 7–10% before inflation over long periods (with significant year-to-year swings), and this varies by market and time period. Try a few different rates to see how sensitive your projection is to that assumption.

Question 3

Why does the inflation-adjusted figure matter?

Accepted Answer

A dollar in 25 years buys less than a dollar today. The "future value in today's dollars" figure discounts your projected balance by the inflation rate you enter, so you can see roughly what that future sum would be worth in current purchasing power — a more honest way to judge whether a projection actually meets a long-term goal.

Question 4

Does this account for taxes or investment fees?

Accepted Answer

No — the return rate you enter is treated as your net rate after any fees, and taxes on withdrawals or gains are not modeled since they depend heavily on account type (e.g., a Roth vs. traditional 401(k), or your local capital gains rules). For a tax-advantaged account, you can generally use your expected gross return; for a taxable account, consider entering a rate reduced for expected tax drag.

Question 5

Is this projection guaranteed?

Accepted Answer

No. This is a planning estimate that assumes a constant monthly return equal to your entered annual rate divided by 12 — real markets do not grow smoothly, and actual results will differ, sometimes substantially, from a straight-line projection like this one.

Question 6

What's the difference between a SIP and investing a lump sum?

Accepted Answer

A lump sum puts your full investment in on day one, so all of it compounds for the entire term. A SIP (systematic investment plan) instead spreads the same money across smaller monthly contributions over time — money added later compounds for less time than money added early. SIPs are usually chosen not because they produce a mathematically better result, but because they match how most people actually earn and save: a fixed amount out of each paycheck, rather than one large sum available upfront.

Question 7

Does it matter if interest compounds monthly vs. annually?

Accepted Answer

Yes, though the effect is smaller than most people expect. Compounding more frequently at the same annual rate produces a slightly higher balance, because interest starts earning its own interest sooner. This calculator compounds monthly, which matches how most savings accounts, SIPs, and 401(k) contributions actually work. For a long-term projection, whether your real account compounds monthly, quarterly, or annually makes far less difference than the return rate or contribution size you assume.

Input	Value
Initial deposit	$5,000
Monthly contribution	$300
Annual return	8%
Future value (25 yrs)	≈ $290,000

Compound Interest & SIP / 401(k) Growth Predictor

How the projection is built

$5,000 initial + $300/month at 8% for 25 years

The Rule of 72 — a mental-math shortcut

Common questions