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Compound Interest Calculator

Calculate compound interest and see how your investments grow over time

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Investment Growth

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See how your money grows over time

Compound Interest Formula

Standard Compound Interest Formula:
A = P(1 + r/n)^(nt)
A = Final amount
P = Principal (initial investment)
r = Annual interest rate (decimal)
n = Number of times interest compounds per year
t = Time period in years

Quick Examples

Conservative Investor
£10,000 initial + £200/month
4% annual return, 20 years
Result: ~£83,000
Moderate Investor
£5,000 initial + £300/month
7% annual return, 15 years
Result: ~£95,000
Aggressive Investor
£20,000 initial + £500/month
10% annual return, 25 years
Result: ~£885,000
Retirement Planning
£1,000 initial + £400/month
6% annual return, 30 years
Result: ~£400,000
Click any example to load the values and see detailed calculations

Understanding Compound Interest

The Magic of Compound Interest

Compound interest is basically money making money on the money it's already made. Instead of just earning interest on your original investment, you start earning interest on all the interest you've accumulated too. It's like a snowball rolling down a hill - starts small but gets massive.

Einstein supposedly called it "the eighth wonder of the world" (though he probably didn't actually say that). The point is, it's incredibly powerful if you understand how to use it.

Why Time is Your Best Friend

Here's where compound interest gets really interesting. The difference between starting at 25 vs 35 isn't just 10 years - it's potentially tens of thousands in missed gains. This is because compounding isn't linear; it's exponential.

Example: £100/month for 40 years at 7% = £262,481. Same amount for 30 years = £101,073. That extra 10 years more than doubled the result!

Compounding Frequency (Does It Matter?)

Not as much as you'd think, but here's the breakdown:

  • Daily: Interest calculated every day (365 times/year)
  • Monthly: Every month (12 times/year)
  • Quarterly: Every 3 months (4 times/year)
  • Annually: Once per year

The difference between daily and annual compounding on a typical savings account? Maybe £10-20 per year on a £10k balance. Don't stress about it.

The Key Factors That Actually Matter

Focus on these four things, in this order:

  • Time: Start early, stay invested. Nothing beats time in the market
  • Interest Rate: 2% vs 7% makes a huge difference over decades
  • Regular Contributions: £100/month beats £1,200 once per year
  • Principal: Your starting amount helps, but consistency matters more

Real-World Numbers That'll Shock You

Let's say you're 25 and invest £200/month at 7% annual return:

  • Age 35 (10 years): £33,121 (£24k invested)
  • Age 45 (20 years): £98,846 (£48k invested)
  • Age 55 (30 years): £226,566 (£72k invested)
  • Age 65 (40 years): £525,202 (£96k invested)

Notice how the last 10 years added more than the first 30 years combined? That's compounding.

How to Make It Work for You

  • Start now: Not next month, not next year. Today
  • Automate everything: Set up direct debits and forget about timing the market
  • Don't touch it: Every withdrawal resets your compounding clock
  • Increase gradually: Bump up contributions with pay rises
  • Think tax-efficient: ISAs, pensions, SIPPs all help
  • Beat inflation: Aim for returns above 2-3% or you're going backwards

Where to Use Compound Interest

  • Pension/retirement: The ultimate long-term compounding machine
  • ISAs: Tax-free compounding up to annual limits
  • Kids' education: 18 years is plenty of compounding time
  • House deposit: If you're not buying for 5+ years