Compound Interest Calculator

See how an investment grows over time with compound interest. Add a monthly contribution and choose how often interest compounds to model a real savings plan.

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Initial amount

Annual interest rate

Years

Monthly contribution

Compounding

Value after 10 years

16,470.09

Initial amount: 10,000
Total contributions: 0
Total deposited: 10,000
Interest earned: 6,470.09
Growth on deposits: 64.7009%

10,000 × (1 + 5% ÷ 12)^(12 × 10) = 16,470.09

How compounding works

Simple interest pays only on your original deposit. Compound interest pays on the deposit plus all the interest already earned, so the balance grows faster the longer it is left.

The effect is unremarkable over a year and dramatic over decades. £10,000 at 5% for 10 years earns £6,289 compounded monthly, against £5,000 with simple interest — and over 40 years the gap grows to £63,000 against £20,000.

A = P(1 + r/n)^(nt)

P — the initial principal
r — the annual interest rate as a decimal
n — how many times a year interest compounds
t — the number of years
A — the final amount

Does compounding frequency matter?

Less than people expect. £10,000 at 5% for 10 years gives £16,289 compounded annually and £16,470 compounded monthly — a difference of about 1%. Moving from monthly to daily adds only a few pounds more.

The rate and the time horizon dominate. Chasing a higher compounding frequency at a lower rate is almost always the wrong trade.

The rule of 72

To estimate how long money takes to double, divide 72 by the interest rate. At 6% that is 12 years; at 8%, nine years.

It is an approximation that works well between roughly 4% and 12%, and it is a fast sanity check on any projection you are shown.

Years to double ≈ 72 ÷ rate

What this does not account for

These are nominal figures before inflation, tax and fees, all three of which matter enormously over long periods. At 3% inflation, money loses about half its purchasing power in 24 years.

Investment returns are also not fixed: a 7% average annual return does not mean 7% every year, and the order of good and bad years affects the outcome when you are contributing or withdrawing.

Frequently asked questions

What is the difference between simple and compound interest?

Simple interest is paid only on the original principal. Compound interest is paid on the principal plus accumulated interest, so growth accelerates. Over long periods the difference is very large.

How long will it take to double my money?

Divide 72 by the annual interest rate for a good estimate. At 6% it takes about 12 years, at 9% about eight. This rule of 72 is accurate enough for rates between roughly 4% and 12%.

Does compounding daily beat compounding monthly?

Only marginally. On £10,000 at 5% over 10 years, daily compounding beats monthly by around £20. The interest rate and the time invested matter far more than the frequency.

Does this account for inflation and tax?

No. These are nominal figures. To estimate real purchasing power, subtract the inflation rate from your return — a 5% return with 3% inflation is about 2% in real terms.

When are the monthly contributions added?

At the end of each month, which is the standard ordinary-annuity assumption. Contributing at the start of each month would give a slightly higher final figure.