Why compounding frequency changes the result, even at the same nominal rate#
A 5% annual rate compounded once a year earns interest only on the original balance each year. Compounded monthly, that same 5% is split into twelve smaller applications, each one earning interest on a balance that already includes the previous month's interest — interest earning interest, slightly more often. The difference is small at low rates and short time horizons but grows with both, which is why the compounding frequency is a real input here, not a cosmetic detail.
How the recurring contribution is modeled#
This assumes each contribution happens at the end of a compounding period (an "ordinary annuity," the standard assumption in this kind of calculator) and at the same frequency as compounding itself — a monthly contribution paired with monthly compounding, for instance. The formula combines two separate growth streams: the starting amount compounding on its own, plus the growing series of contributions each earning interest for whatever time remains after they are added.
Why the contributions-versus-interest split matters#
The future value alone answers "how much will I have," but the split between total contributions and total interest earned answers a more useful question: "how much of this did I actually put in, versus how much did compounding do for me?" Over long time horizons with regular contributions, interest earned can end up exceeding the total amount contributed — a fact that is easy to miss when only the final number is shown.