Saving 500 a month, compounded
500 a month at 5% a year becomes about 77,600 after 10 years and 205,500 after 20, of which 60,000 and 120,000 respectively is your own money. The gap between those two numbers is the whole point: in the first decade most of the balance is what you paid in, and in the second the interest starts to overtake it.
Year by year
| 1 | $6,000.00 | $139.43 | $6,139.43 |
| 2 | $12,000.00 | $592.96 | $12,592.96 |
| 3 | $18,000.00 | $1,376.67 | $19,376.67 |
| 4 | $24,000.00 | $2,507.44 | $26,507.44 |
| 5 | $30,000.00 | $4,003.04 | $34,003.04 |
| 6 | $36,000.00 | $5,882.13 | $41,882.13 |
| 7 | $42,000.00 | $8,164.33 | $50,164.33 |
| 8 | $48,000.00 | $10,870.26 | $58,870.26 |
| 9 | $54,000.00 | $14,021.60 | $68,021.60 |
| 10 | $60,000.00 | $17,641.14 | $77,641.14 |
An estimate, not financial advice. Figures are illustrative and depend on assumptions listed below. Check anything you plan to act on with a qualified adviser or the provider itself.
The worked example below, drawn. The gap between the lines is interest: narrow for years, then most of the balance.
Contributions do almost all the work early on. Interest does not overtake what you paid in until somewhere around year 18 at 5%.
Missing a year of contributions early costs far more than missing one late, because the early money compounds for longer.
A 0.5% platform fee is roughly a 0.5 percentage point cut to the return, which over 20 years is about a tenth of the final balance.
How it works
The formula
monthlyFactor = (1 + r/n) ^ (n/12)
For each of the 12 x years months:
balance = balance x monthlyFactor + contribution
where
r = annual return, as a decimal
n = compounding periods per year (1, 4, 12 or 365)
Present value, when an inflation rate is given:
real = balance / (1 + i) ^ years
What it assumes
- The return is the same every year. Real returns vary, sometimes a great deal, and a steady average will overstate a bad decade and understate a good one.
- Contributions arrive at the end of each month, so a payment does not earn interest during the month it is made. This is the conventional and slightly conservative treatment.
- Contributions never change. Saving that rises with your income produces a materially larger figure than this shows.
- Tax, platform charges and fund fees are not deducted. A 0.5% annual fee is roughly a 0.5 percentage point cut to the return you enter.
- Compounding frequency is converted to a monthly growth factor so that contributions and compounding can differ without changing the method.
Common questions
Does it assume I pay in at the start or the end of the month?
At the end, which is the ordinary annuity convention and what a standing order set up after payday actually does. Paying at the start earns one extra month of growth on every contribution and comes out roughly half a per cent higher over 20 years at 5% — real, but smaller than most people expect.
What happens if I stop paying in but leave the money invested?
Set the monthly amount to zero and the balance keeps compounding on its own. Contributions dominate the early years and growth dominates the later ones, so stopping after ten years costs far less than never starting — which is the whole argument for beginning with a small amount.
Sources
Method written and checked by Tessalor on Jul 28, 2026.
The full method, worked example and every assumption behind this figure are on Compound Interest Calculator.