Explore compounding with regular additions
Compounding means that a balance can earn a return on earlier returns as well as on the original amount. This calculator illustrates that mechanism using a starting balance, a monthly contribution, an annual return and a selected number of years.
It is most useful for testing assumptions and seeing the effect of time, rather than predicting investment performance. Australian investment outcomes can vary with markets, product fees, tax and when money is contributed or withdrawn. Small changes in timing and the assumed rate can compound into noticeably different long-term figures.
How to read the results
Projected balance is the modelled end value after the chosen number of years. Total contributed is the starting balance plus monthly contributions, and Illustrative interest or return is the amount above those contributions.
The displayed illustrative return is the annual percentage used throughout the formula. The balance chart applies that same smooth monthly compounding path and does not represent actual market volatility or a product’s unit price. Testing lower returns or shorter periods helps illustrate the sensitivity of a result without making a market prediction.
Worked example
At the default $10,000 starting balance, $250 monthly contribution, 6% annual return and 10-year horizon, the projected balance is about $59,164. Of that amount, $40,000 is contributed capital and about $19,164 is illustrative interest or return.
The example assumes every $250 contribution arrives at the end of the month and the 6% rate continues unchanged. Real returns may be negative in some periods and can differ from this smooth illustration.
Assumptions and limitations
- The entered annual return is compounded monthly at a constant rate.
- Monthly contributions are made at the end of each month.
- No withdrawals, additional one-off deposits or missed contributions occur.
- Investment fees, transaction costs, tax and inflation are excluded.
- The calculation does not account for the risk, liquidity or suitability of any investment.
Frequently asked questions
Is compound interest the same as an investment return?
The formula applies a compounded rate, but an investment’s return can fluctuate and is not equivalent to guaranteed bank interest.
Why are contributions lower than the final balance?
The difference is the illustrated effect of applying the entered monthly compounded return to the balance over time.
Are deposits added at the start of the month?
No. This calculator assumes end-of-month contributions, so changing the timing would change the result.
This calculator and supporting information provide general estimates only. They do not take account of every product rule, tax consequence or personal circumstance and are not financial, tax, credit or legal advice.