Compound Interest Calculator
See how your money grows with the magic of compounding over time.
Calculator Inputs
Final Balance
£144,573
Total Contributed
£58,000
Interest Earned
£86,573
Return Multiple
2.5x
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- Your Money
- Total Value
Calculator Methodology
Uses monthly compounding formula applied to initial principal plus regular contributions. Historical return benchmarks: UK savings accounts 4–5%, global index funds 7–10% annually over long periods. Results are projections only and do not guarantee future returns. Always consult a qualified financial adviser. Last verified: June 2026.
The Power of Compound Interest
Discover how compound interest works and why starting early can dramatically grow your wealth.
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What Is Compound Interest?
Compound interest is interest calculated not just on your original deposit, but also on the interest you've already earned. Over long periods this creates exponential rather than linear growth, the longer your money is invested, the faster the growth curve accelerates.
Albert Einstein reportedly called compound interest "the eighth wonder of the world", whether or not he actually said it, the underlying maths is real: starting early matters more than the size of your monthly contribution.
Why Starting Early Beats Contributing More
| Investor | Starts At | Monthly | Pot at 65 (7% return) |
|---|---|---|---|
| Investor A | Age 25 | £150 | ~£356,000 |
| Investor B | Age 35 | £150 | ~£170,000 |
| Investor C | Age 45 | £300 | ~£161,000 |
Investor A ends up ahead of Investor C despite contributing half as much per month, because their money had ten extra years to compound.
Realistic Return Rates by Account Type
Cash Savings
4–5%
UK easy-access and fixed-rate savings accounts, capital secure.
Stocks & Shares ISA
5–7%
Diversified index fund investing, historical long-term average.
Global Equity Fund
7–10%
Higher volatility, higher historical long-term return.
Compounding Frequency Matters (A Little)
Interest can compound daily, monthly, or annually depending on the account. More frequent compounding produces slightly higher returns for the same headline rate, for example, 5% compounded monthly grows marginally faster than 5% compounded annually. The difference is small compared to the effect of your rate, contribution size, and time horizon, which is why this calculator focuses on those three levers.
⚠️ Important Disclaimer
This calculator provides illustrative projections based on a constant assumed rate of return; real investment and savings returns fluctuate and are never guaranteed. It is not financial advice. Always consult a qualified, FCA-regulated financial adviser before making investment decisions. Rate benchmarks verified against publicly available market data as of June 2026.
Worked Example: £5,000 at 5% for 10 Years
With interest added once a year, £5,000 grows to 5,000 × 1.05 to the power of 10, which is about £8,144. The interest earned is £3,144.
Simple interest on the same amount would earn only £250 a year, or £2,500 over ten years. Compounding adds roughly £644 more, because each year's interest starts earning interest of its own.
Frequently Asked Questions
Does compounding more often make a big difference?
Monthly compounding gives slightly more than annual compounding at the same rate, but the rate and the time you leave the money matter far more.
What is the Rule of 72?
Divide 72 by the annual rate to estimate how many years it takes to double your money. At 6% that is about 12 years.
Does compound interest work against me on debt?
Yes. Credit cards and overdrafts compound on what you owe, which is why balances can grow quickly if only minimum payments are made.
Frequently Asked Questions
What is compound interest?
Compound interest means you earn interest on your interest, not just your original deposit, making your money grow exponentially over time.
How often is interest compounded?
This can vary, monthly compounding is most common for savings accounts. More frequent compounding = slightly more growth.
What is a realistic return rate?
UK savings accounts offer 4–5% currently. A global index fund has historically averaged 7–10% annually over long periods.
Key Terms Explained
Plain-English definitions of the financial terms used in this calculator.
- AER (Annual Equivalent Rate)
- The interest rate on savings accounts once compounding is included, showing what you would actually earn over a year. Use AER, not the headline gross rate, to compare savings accounts fairly.
- Compound Interest
- Interest earned on both your original money and on interest already added. Over long periods compounding accelerates growth dramatically, the earlier you start saving or investing, the more it works in your favour.
- Principal
- The original amount borrowed or invested, before any interest. On a repayment mortgage or loan, each monthly payment covers interest plus a slice of the principal until the balance reaches zero.
- Inflation
- The rate at which prices rise over time, eroding the buying power of money. If inflation is 3%, £100 today buys only about £97 worth of goods next year, which is why long-term savings need to beat inflation.
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Not Financial Advice: This calculator is for informational and educational purposes only. Results are estimates and do not constitute financial advice, recommendations, or regulated advice. We are not authorised or regulated by the Financial Conduct Authority (FCA). Always consult a qualified financial adviser for personalised advice. Tax treatment depends on your individual circumstances and may change. Tax laws and rates may change. Past performance does not guarantee future results.
