All calculators

Compound Interest Calculator

Estimate how your savings or investments could grow over time. Enter an initial amount, interest rate, term and optional regular deposits, choose how often interest compounds — from daily to yearly — and see your projected balance, contributions and interest earned.

Investment details

£
%

How often interest is added to the balance. Daily uses 365 days a year.

Regular contributions
£
Contribution timing

Beginning-of-period deposits earn interest for longer.

Nominal annual rate
6.00%
Effective annual rate
6.17%
Future investment value
£7,160.22
Total interest earned
£2,160.22
Total money paid in
£5,000.00
Initial investment
£5,000.00
Additional deposits
£0.00
Effective annual rate
6.17%

Assumes a 6% yearly rate, compounded monthly.

Year-by-year breakdown of deposits, interest and balance
YearInterestPaid inBalance
0—£5,000.00£5,000.00
1£308.39£5,000.00£5,308.39
2£327.41£5,000.00£5,635.80
3£347.60£5,000.00£5,983.40
4£369.04£5,000.00£6,352.45
5£391.80£5,000.00£6,744.25
6£415.97£5,000.00£7,160.22

This calculator provides an illustration only and does not constitute financial advice. Actual savings rates, investment returns, fees, taxes and inflation may differ from the assumptions used. Investment values can go down as well as up.

How compound interest works

Compound interest is interest earned on your starting balance plus the interest that has already been added to it. Simple interest only ever pays on the original amount; compound interest pays on a balance that grows every period, so the longer the money is invested the faster it builds.

Three things drive the outcome: the interest rate, the length of time invested, and how much you add along the way. Compounding frequency matters too, but much less than the other three.

Compound interest formula

A = P(1 + r / n)ⁿᵗ
  • A — future value
  • P — initial investment
  • r — annual interest rate as a decimal
  • n — number of compounding periods per year
  • t — term in years

That is the standard formula for a single lump sum. When you add regular contributions, or the deposit interval differs from the compounding interval, one formula no longer fits. This calculator instead runs an event-based timeline: every deposit, withdrawal and compounding point is placed on a schedule measured in years from the start, and the balance is grown between each event, so every cash flow receives exactly the growth it is due.

How regular deposits affect growth

Regular deposits can contribute more to the final balance than the starting lump sum, because each one compounds from the day it is paid in. The earlier a deposit lands, the longer it grows.

That is also why the timing option matters. A deposit made at the beginning of each period is invested one period sooner than the same deposit made at the end, so beginning-of-period contributions always produce a slightly higher final balance at the same rate.

Compounding frequency explained

Compounding frequency is how often earned interest is added to the balance so that it starts earning interest itself — daily, weekly, monthly, quarterly, half-yearly or yearly. At the same nominal annual rate, more frequent compounding produces a marginally higher effective annual rate. In practice the rate level, the time invested and your regular deposits usually matter far more than the interval.

Effective annual rate

EAR = (1 + r / n)ⁿ − 1
  • r — nominal annual interest rate as a decimal
  • n — number of compounding periods per year

The effective annual rate is what you actually earn over a year once compounding is counted. A 6% nominal rate compounded monthly is an effective 6.17% a year. For UK savers this is the same idea as the AER quoted on savings accounts, used to compare products on a like-for-like basis. It does not make an investment projection a guaranteed return.

Example: £5,000 invested with monthly deposits

Take the calculator’s starting values: £5,000 invested at 6%, compounded monthly, over 6 years, with £200 added at the end of every month. That grows to approximately £24,442 — made up of £19,400 paid in (the £5,000 lump sum plus £14,400 of deposits) and about £5,042 of interest.

Change the rate to 5% and the term to 5 years and the same £200 monthly deposit produces about £20,018 — £17,000 paid in and roughly £3,018 of interest.

Important assumptions

  • The result is an illustration, not financial advice or a guarantee.
  • The interest rate is assumed to stay constant for the whole term unless you change it.
  • Daily calculations use 365 days per year.
  • Tax is not calculated. Platform and management fees are not deducted in this version.
  • Inflation is not applied; every figure is a nominal amount in today’s pounds.
  • Figures are rounded for display only; the underlying calculation keeps full precision.

Frequently asked questions

What is compound interest?

Compound interest is interest earned on your starting balance plus all the interest that has already been added to it. Because each round of interest is calculated on a larger balance, the growth speeds up over time — this is the "interest on interest" effect.

How does compound frequency affect returns?

At the same nominal annual rate, adding interest more often produces a slightly higher effective annual rate, because earlier interest starts earning its own interest sooner. The difference between monthly and daily compounding is small; the rate itself, the time invested and any regular deposits matter far more.

Is daily compounding always better than monthly compounding?

Only marginally, and only if the nominal rate is identical. Moving from monthly to daily compounding at 6% lifts the effective annual rate from about 6.17% to about 6.18%. A higher headline rate or a few more years invested outweighs the compounding interval many times over.

Can I calculate weekly or bi-weekly deposits?

Yes. Set the deposit frequency to weekly or bi-weekly even if interest compounds monthly or quarterly. The calculator uses an event-based timeline, so each deposit is credited on its own date and earns the right amount of growth regardless of how the intervals line up.

Are deposits made at the start or end of the period?

You choose. End of period is the default and matches most regular savings plans. Beginning of period means each deposit is invested one period earlier, so it earns interest for longer and the final balance is a little higher.

Does the calculator include tax, fees and inflation?

Not in this version. The projection is a nominal figure before tax, platform fees and inflation. Treat the result as a gross estimate — your real spending power at the end will be lower once those are taken into account.

Is this a guaranteed investment return?

No. The result is an illustration based on a constant rate you enter. Real savings rates change, and investment returns can be negative in any given year. Investment values can go down as well as up.

What is the difference between AER and APR?

AER (annual equivalent rate) shows what you earn on savings in a year once compounding is taken into account, so it is used to compare savings accounts. APR (annual percentage rate) describes the cost of borrowing. This calculator works with the effective annual rate, which is the same idea as AER.