Worked example: separate deposits from growth
Enter a $1,000 starting balance, $100 monthly deposit, 4% annual return and 1 year. The result is approximately $2,263. You supplied $2,200 of that amount yourself: $1,000 initially plus twelve $100 deposits. About $63 is modeled interest. Comparing only the final balance can make the return look much larger than it actually is.
Deposit timing changes the answer
This tool divides the nominal annual rate by twelve and assumes each deposit arrives at the end of the month. The initial $1,000 earns twelve months of interest; the final $100 deposit earns none within the first year. Depositing at the start of each month would produce a slightly higher balance. If another calculator disagrees, check this assumption before assuming either formula is wrong.
Try a zero-return comparison
Set the rate to 0%. The same plan ends at exactly $2,200. This isolates the saving habit from the uncertain return. Then extend the horizon without changing the deposit to see how much of the result comes from extra deposits and how much comes from compounding.
An advertised APY is an effective annual yield, not necessarily the nominal rate this input expects. For monthly compounding, convert APY to a nominal percentage with 12 × ((1 + APY/100)1/12 − 1) × 100. Do not treat a market investment as a fixed-rate bank account: actual returns vary and can be negative. Taxes, fees and inflation are excluded.
Reference tool: Investor.gov compound interest calculator. Match contribution timing and compounding frequency when comparing results.
Examples and assumptions updated September 28, 2026. Amounts are illustrative, not current product quotes.