How a lump sum and monthly contributions grow with compounding.
Future value
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Total contributed
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Interest earned
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Your breakdown
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Amount (RM)
Worked example
Start with RM10,000, add RM500 every month, and compound monthly at 5 percent a year for 20 years. The monthly rate is 5 percent divided by 12, applied over 240 months. The starting RM10,000 grows on its own to about RM27,126, while the stream of RM500 deposits grows as an annuity to about RM205,517, giving a future value near RM232,643. Over those 20 years you actually paid in RM10,000 plus RM500 times 240, which is RM130,000. The difference, about RM102,643, is compound interest, which is interest earning further interest year after year. The longer the money stays invested, the more this gap widens, since the earliest deposits have the most time to compound.
How it is calculated
Compound growth has two parts that are added together. The lump sum grows by the formula principal times one plus the periodic rate, raised to the number of periods, so it earns interest on past interest. The regular contributions grow as an annuity, where each deposit compounds for the time remaining until the end. More frequent compounding produces slightly more growth because interest is credited and starts earning sooner, which is why monthly beats yearly at the same headline rate. The rate you enter is a nominal annual rate that the tool divides across the periods. This projection is before tax, so for taxable products like some unit trusts you would adjust the net rate, though interest from licensed-bank fixed deposits and EPF dividends are tax-exempt for individuals in Malaysia.
Frequently asked questions
How is compound interest calculated?
The lump sum grows by the formula P times (1 plus r divided by n) raised to the power of n times t, where r is the annual rate, n is the number of compounding periods a year, and t is the number of years. Monthly contributions are added as a future-value annuity at the monthly rate. The final value is the sum of both. Compounding more often, such as monthly versus yearly, gives a slightly higher result for the same annual rate.
Does EPF (KWSP) use compound interest in Malaysia?
Yes. EPF declares an annual dividend rate each year, and that dividend is credited to your account and immediately begins earning future dividends. This is compound growth in practice, even though EPF announces a single headline dividend rate rather than a daily or monthly compounding rate. You can use this calculator with the latest EPF dividend rate as the annual rate and yearly as the compounding frequency to approximate how your EPF balance grows over time.
Is interest income taxable in Malaysia?
Interest from savings and fixed deposit accounts held at licensed banks in Malaysia is tax-exempt for individual residents under Schedule 6 of the Income Tax Act 1967. Interest from foreign accounts, bonds sold before maturity, or money-market funds may be taxable depending on the structure. If you are investing through a unit trust or other instrument, check whether the gains are classified as interest or capital growth, as the tax treatment differs. This calculator shows a before-tax figure, so adjust the rate downward for any taxable products.
What compounding frequency should I use for Malaysian fixed deposits?
Most Malaysian bank fixed deposits compound on a monthly or quarterly basis, though the product sheet will state the exact frequency. If you are comparing two FD offers at the same headline rate, the one compounding monthly will produce a slightly higher maturity value than one compounding quarterly. For EPF projections, use yearly compounding since dividends are declared and credited once a year. When in doubt, select the frequency stated in your bank or fund documentation for the most accurate result.