Emma, 28, starts right after graduation to put $180 each month into a broadly diversified equity fund. Over the long run she expects 7 % return per year and wants to keep it up for 30 years.
ℹ Ordinary (end-of-period) payment, 12 installments per year.
Change any number and press "Calculate" – or use "Type in" on the right to watch it entered.
See how time turns small amounts into a fortune: over 30 years Emma pays in only about $65,000 – the large rest of the final wealth is compound interest. Those who start early let the money work for them.
Every installment earns interest until the end – early installments longer, late ones shorter. The bracket (qⁿ−1)/(q−1) sums up all these differently compounded contributions at once. q is the growth factor per period: from the effective rate p.a. the matching monthly factor is derived via the ¹ᐟᵐ root. Takeaway: it is not the sum of the deposits that counts, but how long each dollar is allowed to work.