Compound Interest Calculator

What is compound interest?

Compound interest is interest earned on both your original capital and the interest already accumulated. The Australian financial regulator calls it 'the eighth wonder of the world' for good reason: a R10,000 investment at 9% over 30 years becomes R132,677 with compound interest, but only R37,000 with simple interest. The longer the timeline, the bigger the gap. Almost every South African savings or investment product compounds — banks, unit trusts, retirement annuities, TFSAs, money market accounts.

What return rate should I use for SA?

Sensible defaults for May 2026: cash deposits and money-market accounts ~7% nominal; 32-day notice and fixed deposits 8–9%; balanced unit trusts (Allan Gray, Coronation, Ninety One Balanced) ~9–10% historically; equity-only TFSAs ~10–12% over rolling 10-year periods; offshore equity (S&P 500 in rand terms) varies widely, often 12–15% but with rand weakness boosting the figure. These are pre-fees, pre-tax (except inside a TFSA, which is tax-free). Subtract roughly 0.5–1% per year for unit-trust fees.

Why does inflation matter for compound interest?

A rand's purchasing power erodes over time. R1,000,000 in 30 years buys what about R230,000 buys today, assuming SA's long-run 5% inflation. The 'real' (inflation-adjusted) return is what your money actually grows in purchasing power, and it's much smaller than the nominal return. Use Fisher's exact formula: real return = (1 + nominal) / (1 + inflation) − 1. So 9% nominal at 5% inflation is a 3.81% real return — not 4%. Toggle inflation on in the calculator above to see this in action.

How does monthly contribution change the result?

Monthly contributions compound the same way as the principal, but each month's deposit has less time to grow. The first deposit you make compounds for the full 30 years; the deposit you make in month 359 compounds for one month. The math (annuity-due formula) accounts for this exactly. Two practical insights: (1) starting now with R500/month beats starting in 5 years with R1,000/month for almost any return rate. (2) Stopping contributions but leaving the balance invested is far better than withdrawing — once the balance is meaningful, growth on the existing balance dwarfs what new contributions add.

Is this a savings or investment calculator?

Both — the math is identical. The difference between 'savings' and 'investment' is mainly about which financial product you're using and how risky the return assumption is. A 7% return is realistic for cash savings (no risk of capital loss). A 12% return is realistic for diversified equity over 20+ years (with significant capital volatility). The calculator doesn't model risk — it shows you what a constant return would deliver. Real-world investment returns are lumpy: some years up 30%, some down 20%, averaging out to whatever the long-run figure is.

Should I use simple or compound interest?

Use compound for almost everything. Simple interest only applies in narrow cases: some short-term loans, some bond accrual calculations, NSFAS student loans before consolidation. Every retail savings account, RA, TFSA, unit trust, ETF, fixed deposit and money-market product compounds. The compounding frequency varies (monthly is most common in SA) but compounding always beats simple over time.

How does this differ from the TFSA calculator?

This generic calculator doesn't model the R36,000/year contribution cap, the R500,000 lifetime cap, or the tax-free growth on a Tax-Free Savings Account. If you're specifically planning TFSA contributions, use the TFSA calculator — it warns you about over-contributions (which trigger a 40% SARS penalty), shows your tax savings vs an equivalent taxed investment, and projects when you'll hit the lifetime cap.

What about Rule of 72?

Rule of 72 is a quick mental shortcut: divide 72 by the rate to get the years to double. So 9% return → 72÷9 = 8 years to double; 12% → 6 years; 6% → 12 years. It's accurate to within 1% for rates between 5–15% and is useful for envelope-back-of math, but for any actual decision you want the real compound formula — which is what this calculator uses.