1 yr50 yrs
Total Invested
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Principal + contributions
Interest Earned
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From compounding
Final Balance
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After —
Growth Over Time
What is Compound Interest?
Compound interest is the process of earning interest on both your initial deposit (the principal) and on the interest you've already accumulated. Unlike simple interest, compound interest accelerates over time — a larger balance earns returns each period.
The Compound Interest Formula
A = P × (1 + r/n)^(n×t)
Where A is the final amount, P is your starting principal, r is the annual rate as a decimal, n is how many times per year interest compounds, and t is the number of years.
Why Monthly Contributions Matter So Much
Adding even a modest amount each month dramatically changes your outcome over decades. Each contribution immediately begins compounding, so money added in year one has far more time to grow than money added in year twenty.
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both your initial principal and the interest you've already earned. Unlike simple interest, compounding means your returns accelerate over time — often described as "interest on interest."
How is compound interest calculated?
Use the formula A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate as a decimal, n is how many times interest compounds per year, and t is the number of years. Our calculator handles this automatically and also includes monthly contributions.
How often should interest compound for the best returns?
The more frequently interest compounds, the more you earn — daily compounding produces slightly more than monthly, which produces more than annually. However, the difference narrows at lower interest rates.
What interest rate should I use?
For UK savings accounts, rates currently range from around 3–5% AER. For long-term stock market investments such as a global index fund, a commonly used historical average is around 7% per year — though past performance is never a guarantee of future returns.