Watch your money compound over time.

Compound interest is interest calculated on both your original principal and the interest already accumulated. Unlike simple interest (which only applies to the principal), compound interest snowballs over time — your returns generate further returns. Over long periods, this exponential effect is the key driver of investment growth. A $10,000 investment at 7% compounding annually becomes $25,937 after 10 years and $76,123 after 30 years.

For a diversified Australian share portfolio (e.g., ASX 200 index fund), long-run nominal returns have averaged around 8–10% per year including dividends. Globally diversified ETFs (e.g., VGS) have historically returned around 7–9% p.a. in AUD terms. The default 7% in this calculator is a conservative estimate that accounts for costs but not inflation — it represents a realistic baseline for a broad market ETF portfolio held for 10+ years. Returns are not guaranteed and vary significantly year to year.

Compounding frequency determines how often interest is added to your balance — monthly, quarterly, annually, etc. The more frequently interest compounds, the faster your balance grows, because interest starts earning interest sooner. Monthly compounding gives a slightly higher return than annual compounding at the same nominal rate. For most bank accounts and term deposits, interest compounds monthly or daily. For investment portfolios, returns are realised continuously but often modelled as annual compounding for simplicity.

The Rule of 72 is a mental shortcut to estimate how long it takes your money to double: divide 72 by the annual return rate. At 7% per year, money doubles in roughly 72 ÷ 7 = 10.3 years. At 10%, it doubles in about 7.2 years. At 4%, it takes 18 years. The rule works because of the mathematics of exponential growth and is accurate within a few percent for rates between 2% and 20%. It highlights why even a 2–3% difference in return rate has a massive impact over decades.

Simple interest is calculated only on the original principal: if you invest $10,000 at 7% simple interest for 10 years, you earn $700 per year — $7,000 total, ending with $17,000. With compound interest at the same rate, each year's interest is added to the balance before the next year's calculation. After 10 years you end with $19,672 — $2,672 more, just from reinvesting returns. Over 30 years, simple interest gives $31,000 while compounding gives $76,123. The gap widens dramatically with time, which is why long-term investors benefit so much from compound growth.