How compound interest works
Compound interest is interest earned on your original money and on the interest it has already earned. The more often interest is added to your balance, the faster it grows at the same headline rate.
The calculator works month by month. It converts the annual rate into an equivalent monthly rate for the compounding you choose, adds the interest to your balance, then adds your monthly contribution at the end of each month.
The compound interest formula
For a single deposit with no contributions, the balance after t years is P × (1 + r/n)^(n × t), where P is the starting balance, r is the annual rate as a decimal and n is how many times a year interest is added.
For example, £1,000 at 5% compounded annually for 10 years grows to £1,000 × 1.05^10 = £1,628.89, of which £628.89 is interest.
Worked example with monthly contributions
Starting with £5,000 and adding £200 a month at 4% compounded monthly for 10 years gives a final balance of £36,904.12. You pay in £29,000 in total, so £7,904.12 is interest.
Things to bear in mind
The result assumes the rate stays the same for the whole period. Savings rates change, and investments can fall as well as rise.
It doesn't include tax on interest or the effect of inflation, which reduces what your final balance will buy.
Inputs for the compound interest calculator
Starting balance
The amount you have saved already. Enter 0 if you're starting from nothing.
Monthly contribution
How much you'll add at the end of each month. Enter 0 for a single deposit.
Annual interest rate
The yearly rate as a percentage, for example 4 for 4%.
Time period
How many whole years you'll save for, from 1 to 100.
Interest compounds
How often interest is added to your balance: daily, monthly, quarterly or annually. Check your account's terms if you're not sure.
CALCULATOR QUESTIONS
Compound interest calculator questions
What is compound interest?
It's interest paid on your savings plus the interest they've already earned, so your balance grows faster over time than with simple interest.
What's the difference between AER and the interest rate?
The AER (annual equivalent rate) shows what you'd earn over a year including the effect of compounding. If you know an account's AER, enter it with annual compounding to compare accounts like for like.
How often do savings accounts add interest?
It depends on the account. Many add interest monthly or once a year; the account's terms will tell you.
Does the result include tax?
No. In the UK, interest on savings outside an ISA may be taxable if it's more than your Personal Savings Allowance.