Compound interest calculator
See how your money grows over time with the power of compounding, including regular contributions.
MSc Finance, Chartered Accountant (ICAEW)
Financial analyst with 12 years experience in mortgage advisory, investment planning and personal finance education.
What if?
Portfolio growth over time
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About the Compound interest calculator
Compound interest is often called the eighth wonder of the world — and for good reason. Unlike simple interest, which is calculated only on the original principal, compound interest is calculated on the principal plus all previously earned interest. This creates a snowball effect: the more interest you accumulate, the more interest your interest earns.
The difference between starting to invest at 25 versus 35 is staggering. With a 7% annual return, £10,000 invested at 25 grows to approximately £149,745 by age 65. The same investment at 35 reaches only £76,123 — less than half — despite only 10 fewer years in the market. Time is the most powerful variable in the compound interest formula.
This calculator lets you model any combination of starting capital, regular contributions and return rate, with four compounding frequencies. Monthly compounding (the most common for savings accounts and investment platforms) is slightly more beneficial than annual compounding because interest is reinvested more frequently.
How it works
Future Value = P × (1 + r/n)^(n×t) + PMT × [(1 + r/n)^(n×t) − 1] / (r/n) Where: P = Initial principal (starting amount) r = Annual interest rate (as a decimal, e.g. 7% = 0.07) n = Compounding frequency per year (12 = monthly) t = Time in years PMT = Regular contribution amount (per compounding period)
Where
PPrincipal — your starting investment or savings balancerAnnual rate — divide your percentage by 100 (7% becomes 0.07)nCompounding frequency — 12 for monthly, 4 for quarterly, 1 for annualtTime — number of years your money is investedPMTContribution — amount added each compounding periodWorked example
Starting amount (P): £10,000
Annual rate (r): 7% → 0.07
Monthly compounding (n): 12
Time (t): 10 years
Monthly contribution (PMT): £200
Factor = (1 + 0.07/12)^(12×10) = (1.005833)^120 = 2.0097
Principal growth: £10,000 × 2.0097 = £20,097
Contribution growth: £200 × (2.0097 − 1) / 0.005833 = £34,617
Future value = £20,097 + £34,617 = £54,714
Total invested: £10,000 + (£200 × 120) = £34,000
Interest earned: £54,714 − £34,000 = £20,714
Tips to improve your result
- 1.
Start as early as possible. Even small amounts invested in your 20s will outperform large amounts invested in your 40s. The maths of compounding heavily rewards time over amount.
- 2.
Reinvest dividends. Many investment platforms offer DRIP (Dividend Reinvestment Plans). Automatically reinvesting dividends adds to your compounding base and can significantly increase long-run returns.
- 3.
Increase contributions as your income grows. Even a 3% annual increase in contributions keeps pace with inflation and dramatically improves the final outcome.
- 4.
Choose tax-advantaged accounts first. In the UK, use your ISA allowance (£20,000/year) before taxable accounts. Tax-free growth is the most powerful real-world booster to your compound returns.
- 5.
Don't interrupt the compounding. Withdrawing early or pausing contributions during market dips breaks the compounding chain at exactly the wrong time. Stay invested through volatility.