Enter a starting amount, what you add each month, the interest rate and how long you will save. See your final balance and how much of it is interest.
Results are estimates for planning. Check the figures before you make a financial or health decision.
How the Compound interest works
Compound interest means you earn interest on your earlier interest as well as on your original money. The tool follows the standard idea, A = P(1 + r/n)^(nt), where P is the starting amount, r the annual rate, n the number of times interest is added each year and t the years.
To include monthly savings, it works month by month:
- Interest is converted to an equivalent monthly rate from the compounding frequency you choose (monthly, quarterly, yearly or daily).
- Each month the balance grows by that rate, then your monthly deposit is added at the end of the month.
- The result shows the final balance, the total you paid in, the interest earned and the effective yearly rate.
It assumes a constant rate and constant deposits. Tax, fees, inflation and rate changes are not included, so real returns will differ.
Worked example
Using the default values in the calculator above:
| Input | Value |
|---|---|
| Starting amount | £5000 |
| Added each month | £200 |
| Annual interest rate | 6 % |
| Time | 10 years |
| Interest is added | Monthly |
Balance after 10 years: £41,872.85
| Total paid in | £29,000.00 |
|---|---|
| Interest earned | £12,872.85 |
| Effective yearly rate | 6.17% |
Tips and common mistakes
Test different rates and time periods, because time usually matters more than the starting sum. Use a rate your account or investment can realistically deliver, and remember that investments can fall as well as rise. Try a lower rate as a cautious case. Remember that inflation reduces what the final amount can buy, and that tax-free wrappers such as ISAs affect what you keep. For a target amount, try the savings goal tool. General information, not advice.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount. Compound interest is paid on the original amount plus interest already added, so growth speeds up over time.
Does compounding frequency matter much?
It makes a small difference. Daily compounding grows slightly faster than yearly at the same stated rate. The effective yearly rate in the results shows the combined effect.
Are my deposits added at the start or end of the month?
At the end of each month, after that month’s interest has been added. Depositing at the start would give a slightly higher result.