How compound growth works
Why a balance grows faster when interest is added to the balance, and how a monthly contribution changes the path.
By David Miller Updated Sources
Interest that stays in the account becomes part of the balance that earns interest next period. That is compounding. A contribution does the same job from the outside: it raises the balance that later periods grow.
The rate you assume matters more over long periods than the starting amount, because each period’s growth is a share of a larger balance. A monthly contribution adds a second stream that has less time to grow than the original deposit, which is why the calculator adds it at the end of the month.