How this calculator works
How our compound interest calculator works.
We believe a calculator is only useful if you know what it’s actually doing. Here’s the full method, the formula, and every assumption behind the numbers — nothing hidden.
What it calculates
The calculator estimates how a starting amount plus regular contributions could grow over time, using compound interest. You give it five things: a starting amount, a regular contribution and its frequency (weekly, fortnightly or monthly), an expected annual return, a compounding frequency (daily, monthly, quarterly, half-yearly or annually), and a number of years.
The method, step by step
- Contributions are pooled into each compounding period. Your contribution frequency and the compounding frequency are separate choices, so we first spread your contributions evenly across the compounding periods: Contribution per period = your contribution × payments per year ÷ compounding periods per year For example, $100 a week with monthly compounding becomes 100 × 52 ÷ 12 = $433.33 per month. It works in both directions: a $500 monthly contribution with daily compounding is spread as 500 × 12 ÷ 365 = $16.44 per day, and $100 a week with quarterly compounding pools into 100 × 52 ÷ 4 = $1,300 per quarter.
- The balance compounds at your chosen frequency. We divide your annual return by the number of compounding periods in a year to get a per-period rate. Each period, the balance earns that period’s interest first, then the pooled contribution is added at the end of the period. Repeated over your whole timeframe, this is the standard future-value formula: FV = P(1 + i)ⁿ + M × [((1 + i)ⁿ − 1) ÷ i] where P is your starting amount, M the pooled contribution per period, i the annual rate ÷ periods per year, and n the total number of periods (years × periods per year). The first term is your starting amount compounding; the second is the future value of your contributions (an “ordinary annuity” — contributions at the end of each period).
- The result is split in two. “You put in” is your starting amount plus every contribution. “Growth earned” is everything else — the compounding at work.
A worked example
$5,000 to start, $100 a week, 6% p.a., 20 years, compounding monthly:
| Step | Value |
|---|---|
| Pooled contribution | $433.33 per month |
| Per-period rate | 0.5% (6% ÷ 12) |
| Number of periods | 240 |
| Estimated total | $216,769 |
| You put in | $109,000 |
| Growth earned | $107,769 |
Changing only the compounding frequency shifts the result — this is why the option matters:
| Compounding | Estimated total | Growth earned |
|---|---|---|
| Annually | $207,321 | $98,321 |
| Half-yearly | $212,353 | $103,353 |
| Quarterly | $214,977 | $105,977 |
| Monthly | $216,769 | $107,769 |
| Daily | $217,647 | $108,647 |
The assumptions — read these before relying on any number
- The return is nominal, compounded at your chosen frequency. A “6%” input isn’t the same result at every setting: 6% compounded annually is exactly 6% effective, monthly works out to about 6.17%, and daily about 6.18%. This is the convention most calculators (and NZ banks) use, but it’s worth knowing when comparing rates.
- Returns are assumed constant. Real investments don’t grow in a straight line — markets rise and fall around any long-term average, and the sequence of good and bad years affects the outcome.
- Results are before tax and fees. Tax (such as RWT or your PIR for PIE funds) and fund or platform fees would reduce the result, sometimes materially.
- Figures are in future dollars. Inflation will mean the end amount buys less than the same figure would today.
- Contributions are pooled and treated as end-of-period. Your deposits are spread evenly across the compounding periods and credited at the end of each one. When compounding is less frequent than your contributions (say, weekly deposits with annual compounding), this is conservative — real deposits would start earning sooner. When compounding is more frequent (monthly deposits with daily compounding), it’s very slightly generous. Either way the difference is small next to the uncertainty in the return itself.
- A year is treated as 365 days for daily compounding, ignoring leap years.
- No allowance for missed contributions, withdrawals, or changes to your contribution or return over time.
What this calculator is — and isn’t
This tool does the maths on the numbers you give it. That’s all. It doesn’t recommend any investment, product or strategy, and it doesn’t take your personal circumstances into account, so it isn’t financial advice under the Financial Markets Conduct Act 2013. An estimate is not a promise: no rate of return is guaranteed, and past or assumed returns are not a reliable indicator of what you’ll actually get.
If you want to talk about what these numbers could mean for you — how much to contribute, what return assumptions are realistic for your risk profile, or which investments might suit — that’s financial advice, and it’s what we do. Book a free chat and we’ll go through it properly.
Sow Financial Limited (FSP1008822) is a licensed financial advice provider. Our public disclosure statement sets out our licence status, how we’re paid, our complaints process, and our dispute resolution scheme.
Calculator methodology last reviewed: July 2026. If we change the method or assumptions, we’ll update this page.