Compound Interest Calculator
Calculate compound interest growth over time with optional deposits.
What this calculator does
This calculator projects what a balance becomes when returns are reinvested rather than taken out. You supply a starting amount, a rate, a time period, and optionally a regular deposit, and it returns the future value, total interest earned, total deposits made, the effective annual yield after compounding, and how long your money takes to double.
It handles the details that simpler tools skip: rates quoted over periods other than a year, deposit frequencies from daily to annual, contributions that escalate each year, beginning or end of period timing, and regular withdrawals. Those details are usually where the difference between a rough answer and a useful one lies.
When to use it
Use it whenever the question is what a savings or investment plan becomes over time. Sizing an ISA contribution, comparing a 4.5 percent fixed-rate bond against a 6 percent equity assumption, or testing whether an extra £150 a month materially changes your position in fifteen years are all the same calculation.
It works just as well in reverse, for deciding against something. Seeing that a £5,000 purchase costs roughly £21,000 of foregone balance in 25 years at 6 percent is a sharper argument than any budgeting rule. If your specific question is about a doubling time or converting a nominal rate to an effective one, the rule of 72 and APY calculators answer those more directly.
Understanding the inputs
Rate period lets you enter a rate quoted over any interval — a 0.5 percent monthly rate converts to roughly 6.17 percent annually. Compound frequency then sets how often interest is credited, which has a smaller effect than most people expect.
Deposit amount and frequency are normalised to a monthly equivalent, so £100 weekly is treated as £433.33 a month. Annual deposit increase applies from year two and models contributions that track your salary. Deposit timing decides whether money is added before or after interest accrues in each period — worth roughly one period's growth on every deposit, the distinction between an annuity due and an ordinary annuity.
How is this calculated?
The core formula is FV = P(1 + r/n)^(nt) + PMT × [(1 + r/n)^(nt) − 1] / (r/n), where P is your initial investment, r is the annual interest rate, n is the number of compounding periods per year, t is the number of years, and PMT is the periodic deposit.
The calculator first converts your entered rate to an effective annual rate based on your chosen Rate Period — so if you enter a monthly rate of 0.5%, it becomes an annual rate of about 6.17% using (1 + 0.005)^12 − 1. It then applies your chosen Compound Frequency to determine how often interest is added to your balance. More frequent compounding always produces a slightly higher balance: daily compounding on a 5% annual rate yields an APY of 5.127%, versus 5.116% for monthly.
Your deposits are spread to a monthly equivalent regardless of chosen frequency, so a £100 weekly deposit is treated as £433.33 per month. If you set an Annual Deposit Increase, each year's deposits grow by that percentage from the second year onward — useful for modelling salary-linked savings.
Deposit Timing controls whether each deposit is added before or after interest accrues in a given period. Beginning-of-period deposits earn a full period of interest, while end-of-period (the default) do not — the same distinction as an annuity due versus an ordinary annuity.
A worked example
Start with £5,000, add £400 a month, and assume 6 percent compounded monthly over 25 years. The final balance is roughly £299,500. Your own money accounts for £125,000 of that — the initial £5,000 plus £120,000 of contributions — and compound growth supplies the remaining £174,500.
The shape is more instructive than the total. At the fifteen-year mark the balance is only about £128,600, so the final decade produced roughly £171,000 against the first fifteen years' £123,600 from identical inputs. Note also that £400 a month is £4,800 a year, comfortably inside the £20,000 annual ISA allowance, so this whole projection can compound free of UK tax.
Limitations and assumptions
The calculator assumes a single flat rate that never varies. Real markets deliver a sequence of good and bad years instead, and the order of those years changes outcomes materially once you are withdrawing. Past performance does not predict future returns, and a 6 percent assumption is a planning convention rather than a promise.
It also ignores tax, fund charges, platform fees, and inflation, all of which reduce what you actually keep. Figures are nominal. Treat the output as a way to compare scenarios and understand how compounding behaves — not as regulated financial advice or a forecast of what any particular account will be worth.
Common Questions
- What makes compound interest different from simple interest?
- Simple interest pays only on your original deposit. Compound interest pays on the deposit plus every pound of interest already credited, so the base grows each period. Over one year the difference is trivial. Over thirty, at 6 percent, compounding turns £10,000 into about £57,000 while simple interest reaches only £28,000.
- How much does compounding frequency really matter?
- Less than most people assume. At a 5 percent nominal rate, annual compounding yields exactly 5 percent, monthly yields 5.116 percent, and daily yields 5.127 percent. The gap between monthly and daily is about a pound per £10,000 per year. Rate and time move your balance; frequency is a rounding detail.
- What is AER and how does it relate to this?
- AER is the effective annual rate UK savings providers must quote, showing what you would earn over a year once compounding is included. It is the same figure this calculator reports as effective annual yield. When comparing accounts, compare AER against AER — a headline gross rate paid monthly is not directly comparable to one paid annually.
- What return rate should I enter?
- Match the rate to the account. A savings account or fixed-rate bond uses its AER. For a globally diversified equity fund, 6 to 7 percent is a common long-run assumption before inflation, and 3 to 4 percent after. Entering 10 percent because a fund did that recently will flatter the result badly.
- Why does the balance barely move in the early years?
- Because early growth is dominated by your contributions and late growth is dominated by returns. With £400 a month at 6 percent and nothing to start, year one adds roughly £4,930, of which only about £130 is growth. By year twenty-five a single year adds nearly £21,000, around £16,000 of it growth. The curve only looks exponential once you have given it enough years.
- Does this account for tax?
- No — returns compound gross. Inside a Stocks and Shares ISA or Cash ISA that is realistic, since growth, interest, and dividends are free of UK tax. Outside a wrapper, interest above your Personal Savings Allowance and dividends above the dividend allowance are taxable, and gains above the CGT annual exempt amount attract capital gains tax.
- What is the annual deposit increase field for?
- It models contributions that rise with your salary. Increasing deposits 3 percent a year keeps your savings rate constant as pay rises rather than letting inflation erode it. Applied from year two onward, a 3 percent escalator on £400 monthly deposits adds a substantial sum over 25 years — often more than a full point of extra return would.
- Can I model drawing money out as well?
- Yes. The withdrawal fields take a regular amount from the balance, with an optional annual increase to reflect inflation. Withdrawals are capped at the available balance so it never goes negative. This is how you check whether a pot can sustain a given level of spending without running dry.
- Does the result account for inflation?
- No — every figure is in nominal pounds. A £300,000 balance in 25 years buys roughly what £162,000 buys today at 2.5 percent inflation. To see purchasing power directly, enter a real rate instead: subtract expected inflation from the nominal rate, so 6 percent becomes about 3.4 percent.