How it's calculated
FV = P(1+r/n)ⁿᵗ + PMT × [((1+r/n)ⁿᵗ − 1) ÷ (r/n)]
P = principal, r = annual rate, n = compounds per year, t = years, PMT = contribution added each period. Future value = grown principal plus the future value of the contribution stream. EAR = (1+r/n)ⁿ − 1.
Common questions
What does compounding frequency change?
More frequent compounding earns a little more, because interest starts earning its own interest sooner. Continuous compounding is the theoretical maximum.
Do monthly contributions help much?
Yes. Regular contributions add new principal that also compounds, so they often dwarf the starting balance over long terms.