Finance
See how your money grows over time with compound interest.
Final Amount
146,932.81
Your principal of 100,000 grows to 146,932.81, earning 46,932.81 in interest.
Compound interest is calculated using the formula A = P × (1 + r/n)^(n×t), where P is principal, r is annual rate, n is compounding frequency, and t is time in years.
Compound interest is interest paid on both your original principal and previously earned interest. Unlike simple interest (fixed annual returns), compound interest accelerates growth exponentially because each period's earnings become part of the base for the next period's calculation. It's the reason 'time in the market' beats 'timing the market'—a £1,000 investment at 8% annually grows to £4,661 in 20 years, but to £10,063 in 30 years.
The calculator multiplies your principal by a growth factor that accounts for the interest rate, compounding frequency (daily, monthly, quarterly, annually), and time period. You enter the starting amount, annual interest rate (as a percentage), number of years, and how often interest is added back to the principal. The tool then calculates the final amount, total interest earned, and optionally shows the growth in each year or month so you can see exactly when acceleration happens.
A = P(1 + r/n)^(nt)A is the final amount; P is the principal (starting amount); r is the annual interest rate as a decimal (5% = 0.05); n is the compounding frequency per year (12 for monthly, 4 for quarterly, 1 for annually); t is the time in years.
| Input | Result | Notes |
|---|---|---|
| Principal £10,000, Rate 6% p.a., Time 10 years, Compounded annually | Final Amount: £17,908 | Interest Earned: £7,908 | Shows why starting early matters: 10 years of compounding nearly doubles your money. |
| Principal £5,000, Rate 4% p.a., Time 25 years, Compounded monthly | Final Amount: £13,528 | Interest Earned: £8,528 | Monthly compounding outpaces annual—£27 extra vs. annual-only because interest is reinvested 300 times instead of 25. |
| Principal £50,000, Rate 7.5% p.a., Time 20 years, Compounded quarterly | Final Amount: £210,648 | Interest Earned: £160,648 | Larger principal demonstrates the power law: at higher rates and longer terms, compound interest dominates the original deposit. |
Simple interest is calculated only on the principal each year. Compound interest is calculated on the principal plus all previously earned interest. Over time, compound interest grows much faster—a £5,000 investment at 8% grows by £400/year under simple interest, but the interest earned each year increases under compound interest, resulting in £11,639 instead of £9,000 after 10 years.
Yes, but the difference shrinks at low interest rates and short periods. At 2% for 5 years, daily vs. annual differs by under £10 on £10,000. At 8% for 30 years, daily compounds to £101,051 vs. £100,627 for annual—a £424 difference. Use the calculator to see the real impact for your scenario.
Use the historical average or stated rate: UK savings accounts range 3–5%, bonds 4–6%, equity funds historically 7–10%, and FDs 4–7%. Conservative planning uses a lower figure; optimistic plans use higher. Run multiple scenarios and see the range.
Yes—compound interest works the same way but grows your debt instead of your savings. A £200,000 mortgage at 5% compounded monthly over 25 years costs you about £373,000 in total (£173,000 in interest). Use this to see how early overpayments save tens of thousands.
Calculate the nominal (before-inflation) final amount using this tool, then estimate inflation (typically 2–3% annually in developed markets) and reduce the purchasing power. Alternatively, use an 'inflation-adjusted return' by subtracting the inflation rate from your interest rate—so a 6% return in a 3% inflation year nets 3% real growth.
More frequent (daily) always yields more than annual, but the gap narrows at lower rates. Most UK savings accounts and FDs use monthly or quarterly compounding. For very long terms (20+ years), daily compounding can add 2–5% to your final amount, but the cost or availability difference often outweighs the gain.