What does $1,000 grow to: annual vs monthly compounding by rate and years

At 6% for 10 years, $1,000 grows to $1,790.85 with annual compounding and $1,819.40 with monthly compounding. The difference is $28.55 on a $1,000 deposit. The longer the time and the higher the rate, the more the compounding frequency matters.

Informational only, not financial advice. Real accounts have fees, taxes and variable rates that these tables ignore.

How is the growth calculated?

The formula is FV = P x (1 + r/n)^(n x t):

P is the starting amount: $1,000.
r is the nominal annual rate as a decimal.
n is the number of compounding periods per year (1 for annual, 12 for monthly).
t is the number of years.

Every value below came from Mathify's Compound Interest Calculator logic and was checked against the formula above in the generating script, scripts/content-data/growth-of-1000.ts. No deposits or withdrawals are made after the start.

What does $1,000 grow to with annual compounding?

Assumptions: one starting deposit of $1,000, nominal annual rate, interest added once a year, no further contributions, no taxes or fees.

2%: 5 yr $1,104.08 | 10 yr $1,218.99 | 20 yr $1,485.95 | 30 yr $1,811.36
4%: 5 yr $1,216.65 | 10 yr $1,480.24 | 20 yr $2,191.12 | 30 yr $3,243.40
5%: 5 yr $1,276.28 | 10 yr $1,628.89 | 20 yr $2,653.30 | 30 yr $4,321.94
6%: 5 yr $1,338.23 | 10 yr $1,790.85 | 20 yr $3,207.14 | 30 yr $5,743.49
7%: 5 yr $1,402.55 | 10 yr $1,967.15 | 20 yr $3,869.68 | 30 yr $7,612.26
8%: 5 yr $1,469.33 | 10 yr $2,158.92 | 20 yr $4,660.96 | 30 yr $10,062.66
10%: 5 yr $1,610.51 | 10 yr $2,593.74 | 20 yr $6,727.50 | 30 yr $17,449.40

What does $1,000 grow to with monthly compounding?

Assumptions: same as above, but interest is added every month at one-twelfth of the annual rate.

2%: 5 yr $1,105.08 | 10 yr $1,221.20 | 20 yr $1,491.33 | 30 yr $1,821.21
4%: 5 yr $1,221.00 | 10 yr $1,490.83 | 20 yr $2,222.58 | 30 yr $3,313.50
5%: 5 yr $1,283.36 | 10 yr $1,647.01 | 20 yr $2,712.64 | 30 yr $4,467.74
6%: 5 yr $1,348.85 | 10 yr $1,819.40 | 20 yr $3,310.20 | 30 yr $6,022.58
7%: 5 yr $1,417.63 | 10 yr $2,009.66 | 20 yr $4,038.74 | 30 yr $8,116.50
8%: 5 yr $1,489.85 | 10 yr $2,219.64 | 20 yr $4,926.80 | 30 yr $10,935.73
10%: 5 yr $1,645.31 | 10 yr $2,707.04 | 20 yr $7,328.07 | 30 yr $19,837.40

How much does monthly compounding add over annual?

Over 30 years, the extra growth from monthly compounding on a single $1,000 deposit:

2%: monthly compounding adds $9.85 over 30 years ($1,811.36 vs $1,821.21)
4%: monthly compounding adds $70.10 over 30 years ($3,243.40 vs $3,313.50)
5%: monthly compounding adds $145.80 over 30 years ($4,321.94 vs $4,467.74)
6%: monthly compounding adds $279.08 over 30 years ($5,743.49 vs $6,022.58)
7%: monthly compounding adds $504.24 over 30 years ($7,612.26 vs $8,116.50)
8%: monthly compounding adds $873.07 over 30 years ($10,062.66 vs $10,935.73)
10%: monthly compounding adds $2,388.00 over 30 years ($17,449.40 vs $19,837.40)

At 2% the gap is under $10 over three decades. At 10% it is more than $2,000, because interest has more time and a larger balance to compound on.

What is the effective annual rate for each nominal rate?

Monthly compounding at a nominal 6% is equivalent to one annual rate of 6.1678%. Comparing nominal rates with different compounding frequencies is misleading, so use the effective rate:

2% nominal: 2.0184% effective with monthly compounding, 2.0201% with daily compounding
4% nominal: 4.0742% effective with monthly compounding, 4.0808% with daily compounding
5% nominal: 5.1162% effective with monthly compounding, 5.1267% with daily compounding
6% nominal: 6.1678% effective with monthly compounding, 6.1831% with daily compounding
7% nominal: 7.2290% effective with monthly compounding, 7.2501% with daily compounding
8% nominal: 8.3000% effective with monthly compounding, 8.3278% with daily compounding
10% nominal: 10.4713% effective with monthly compounding, 10.5156% with daily compounding

Mathify's Daily Compound Interest Calculator covers daily compounding, and the APY vs APR Calculator converts between the two quoted rates.

Worked example: $1,000 at 6% for 10 years

Annual compounding: 1,000 x 1.06^10 = $1,790.85, a gain of $790.85.
Monthly compounding: 1,000 x (1 + 0.06/12)^120 = $1,819.40, a gain of $819.40.
Daily compounding (365 periods): $1,822.03.
Simple interest with no compounding: $1,600.00.

Compounding frequency adds a modest amount here. The rate and the time horizon do most of the work.

How much does time matter compared with frequency?

At 10% with annual compounding, $1,000 grows by a factor of 17.45 over 30 years. At 2% it grows by a factor of 1.81. That is a much larger spread than any switch between annual and monthly compounding. If you want to know how long doubling takes at a given rate, see Rule of 72 accuracy table or the Rule of 72 Calculator.

Common mistakes

Treating a nominal rate and an effective annual rate as the same number.
Forgetting that these tables assume no withdrawals and no extra deposits.
Ignoring inflation, taxes and fees when judging real returns.
Using a rate from a past period as a guarantee for the future.
Mixing up total balance with total gain.

Key takeaways

Monthly compounding beats annual at the same nominal rate, but the effect is small at low rates.
Rate and time drive the result far more than frequency.
Use the effective annual rate to compare accounts.
Run your own figures through the Compound Interest Calculator.

FAQ

What does $1,000 become in 10 years at 6%?

$1,790.85 with annual compounding or $1,819.40 with monthly compounding.

Is monthly compounding always better than annual?

At the same nominal rate, yes, because interest is added to the balance sooner. The advantage is small at low rates and short horizons.

What is the difference between APR and APY?

APR is a nominal rate. APY includes the effect of compounding. A 6% rate compounded monthly has an APY of about 6.1678%.

Do these tables include contributions?

No. They show a single $1,000 deposit left untouched. Adding regular deposits needs a calculator that takes contributions into account.

Are the returns guaranteed?

No. The tables show arithmetic at a constant rate. Real savings rates change and market investments fluctuate.

What does $1,000 grow to: annual vs monthly compounding by rate and years