Compound interest calculator
See how your savings grow over time when interest is earned on interest. Compound growth is the most powerful force in personal finance - and it works for you whether you understand it or not.
The magic of compound interest is that the interest you earn also earns interest. In the early years the growth looks slow and unremarkable. In the later years it accelerates dramatically. This is why starting early matters so much more than the amount you start with - time in the market beats timing the market, and it beats starting late with a larger sum almost every time.
Why compound beats simple
Simple interest pays the same amount each year on your original deposit. Compound interest pays interest on your growing total - which means it accelerates over time.
The rule of 72
Divide 72 by your interest rate to find roughly how many years it takes to double your money. At 5%, your money doubles in about 14 years. At 8%, in about 9 years.
ISA and pension wrappers
Compound interest works even better inside a Stocks and Shares ISA or pension because the growth is not taxed each year. The interest earns interest without HMRC taking a cut along the way.
Compound works against you too
The same maths that grows savings also grows debt. Credit card interest and personal loans compound in the same way - which is why paying off high-interest debt first is nearly always the right move.
Please note: This calculator assumes a constant interest rate throughout the period and that contributions are made at the start of each month. Actual returns will vary. Investment returns are not guaranteed and the value of investments can go down as well as up. This calculator is for guidance only and is not financial advice.
Calculator results are estimates based on the information you enter and the assumptions built into the tool. They are illustrative only and should not be relied upon as accurate projections. Rates, thresholds and rules change regularly; always verify figures with an appropriate professional or official source before acting on them.
What is compound interest?
Compound interest is interest earned on interest – the process by which returns accumulate on an ever-growing base rather than on the original amount alone. Over time, this produces growth that accelerates as the balance grows, which is why Albert Einstein is often (perhaps apocryphally) credited with calling it the eighth wonder of the world.
The formula involves four variables: the starting amount (principal), the regular contribution, the interest rate, and the time period. Of these four, time is the most powerful — a relatively modest amount saved over a long period consistently outperforms a larger amount saved over a shorter period.
How to use this calculator
Starting amount: The initial sum you are working with. This could be savings, an investment, or zero if you are starting from scratch.
Monthly contribution: The regular amount you plan to add each month. The calculator compounds both the starting amount and the ongoing contributions.
Annual interest rate: For savings, enter the current rate on your account. For investments, enter your assumed annual return – typically 4 to 6% for a cautious portfolio, 6 to 8% for a globally diversified equity portfolio.
Timeframe: The number of years over which you want to see the growth. Try projecting over 10, 20 and 30 years to see how dramatically the outcome changes.
Reading the result: The calculator shows the final balance, total contributions, and total interest or return earned. The ratio of interest to contributions is the compounding effect made visible – over 30 years at 6%, interest typically exceeds total contributions by a significant margin.
The most useful ways to use this calculator
Comparing saving rates: Run the calculation at 3%, 4%, and 5% on the same balance and timeframe to see the pound difference a 1% rate improvement makes over time — often more than people expect.
The cost of waiting: Run the calculation starting now. Then run it with a one-year delay. The difference is the compounding you lose by waiting — not just one year’s contribution, but one year of compounding on all future contributions.
Taxable versus tax-free: Run the calculation at your savings rate for a taxable account (applying your marginal tax rate to the interest before compounding) and compare to the tax-free equivalent in an ISA. The difference grows significantly over time.
Frequently asked questions
What is the difference between simple and compound interest? Simple interest calculates interest only on the original principal — £1,000 at 5% simple interest earns £50 per year, every year. Compound interest calculates interest on the growing balance – in year two, it earns 5% on £1,050, not £1,000. The difference is small in year one; it becomes very large over decades.
How often is interest compounded? Interest can compound daily, monthly, quarterly or annually. More frequent compounding produces slightly higher returns for the same annual rate. Savings accounts in the UK typically compound monthly or annually. The calculator uses annual compounding as the standard.
Does this apply to debt as well as savings? Yes – compound interest works in both directions. Credit card debt at 24.9% APR compounds against you just as effectively as savings compound for you. This is why carrying a credit card balance is so expensive and why clearing high-interest debt should always take precedence over significant savings.
The information on this site is for educational and informational purposes only. Nothing on Be More Peter constitutes financial advice, and nothing should be treated as such. The calculators, articles and tools on this site are designed to help you understand financial concepts and run indicative numbers - they are not a substitute for professional advice tailored to your specific circumstances. Before making any financial decision - including decisions about mortgages, pensions, investments, savings or insurance — you should seek independent financial advice from a qualified adviser who is authorised and regulated by the Financial Conduct Authority (FCA). Calculator results are estimates based on the information you enter and the assumptions built into the tool. They are illustrative only and should not be relied upon as accurate projections. Rates, thresholds and rules change regularly - always verify figures with an appropriate professional or official source before acting on them. Be More Peter is not authorised or regulated by the FCA. The content on this site does not constitute a financial promotion.
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