Monthly Compound Interest Calculator
Use this focused monthly compound interest calculator when your search intent is specifically monthly compounding or monthly contribution growth.
Monthly compounding formula
Monthly vs yearly compounding
Monthly compounding usually produces a slightly higher result than yearly compounding at the same nominal rate. Read the monthly vs yearly compounding guide for a direct comparison.
What monthly compounding is worth against the alternatives
Monthly compounding is the default assumption on this site because it matches how most savings accounts credit interest and how most people contribute. Using the values this page opens with — $1,000 to start, $100 a month, 6% a year over ten years — here is what changing only the frequency does.
| Compounding | Final balance | vs yearly compounding |
|---|---|---|
| Yearly (1) | $17,608 | $0 |
| Quarterly (4) | $18,094 | $487 |
| Monthly (12) | $18,207 | $600 |
| Daily (365) | $18,263 | $655 |
$1,000 initial, $100 monthly, 6% nominal, ten years, contributions at the end of each period.
Monthly compounding beats yearly by about $600 over the decade. Daily compounding beats monthly by roughly $55 — a rounding error by comparison. If you are choosing between accounts, the rate is worth far more attention than the compounding frequency.
Monthly compounding and monthly contributions are not the same thing
These two get conflated constantly, and conflating them is the most common source of inflated compound interest figures on the internet.
- Monthly compounding is how often interest is calculated and added to the balance.
- Monthly contribution is how often you add new money.
- They can differ. An account can compound daily while you deposit monthly, or compound annually while you deposit weekly.
- The error to avoid: treating each monthly deposit as if it had been present since day one. A deposit made in month 118 of a 120-month plan earns two months of growth, not ten years of it.
On these inputs the honest answer is $18,207 from $13,000 contributed. A calculator that applies a full year of growth to every deposit made during the year will show noticeably more, and will be wrong. The common mistakes page prices this error and six others.
Questions about monthly compounding
How do I calculate monthly compound interest?
Divide the annual rate by 12 to get the monthly rate, then apply it once per month: FV = P × (1 + r/12)12t. With monthly contributions, add each deposit at the point in the month it is made and let it compound from there.
Is monthly compounding better than annual?
Slightly, for a saver. On these inputs it is worth about $600 over ten years. Meaningful, but far smaller than the effect of a higher rate or a larger contribution.
What is the monthly rate on a 6% annual rate?
0.5% per month as a nominal conversion (6 ÷ 12). Note that 0.5% compounded twelve times gives an effective 6.1678% for the year, not 6% — that difference is what the effective annual rate calculator measures.
Do banks really compound monthly?
Many credit interest monthly; some compound daily and pay monthly; some pay annually. The product terms will say. For comparison purposes the published APY already folds the frequency in, which is why it is the number to compare.