Compound Interest Calculator
See how your savings grow with compound interest. Add regular monthly contributions to supercharge your returns.
How Compound Interest Calculator works
Compound interest formula
For a lump sum: FV = P × (1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding periods per year, and t is years. For regular contributions: FV = PMT × [(1 + r/n)^(nt) − 1] ÷ (r/n).
The power of compounding
Compounding means earning interest on interest. Over long periods this creates exponential growth. £5,000 at 5% for 30 years grows to £21,610 with compound interest, vs £12,500 with simple interest. Monthly contributions amplify this significantly.
Compounding frequency
More frequent compounding produces slightly higher returns. Daily compounding earns marginally more than monthly, which earns more than annual. In practice, most UK savings accounts compound monthly or annually. The difference between monthly and daily is small.
Real vs nominal returns
This calculator uses nominal interest rates. Real returns (after inflation) are lower. At 2% inflation, a 4.5% nominal rate gives a 2.5% real return. For long-term planning, consider inflation-adjusted projections.
Frequently asked questions
What is compound interest?
Compound interest means earning interest on your interest, not just on your original deposit. Each period, interest is added to the balance, so the next period's interest is calculated on a larger amount. Over time this creates exponential growth.
How much will £10,000 grow in 10 years?
At 4.5% annual interest compounded monthly: £10,000 grows to £15,600. At 6%: £18,194. At 8%: £22,196. The rate and time period are the biggest drivers of the final amount.
What is the difference between compound and simple interest?
Simple interest: earned only on the original principal. Compound interest: earned on principal plus accumulated interest. Over 20 years at 5%, £10,000 becomes £20,000 simple vs £26,533 compound.
How do I maximise compound interest?
Start early (time is the biggest factor), maximise contributions, choose higher-rate accounts (ISAs, premium bonds, stocks and shares for long-term), and reinvest all interest rather than withdrawing it.