Compound Interest Calculator
Use this free compound interest calculator to see exactly how your savings or investments grow over time. Enter your principal, interest rate, compounding frequency, and time period for a complete breakdown of your investment growth — year by year.
📈 Compound Interest Calculator
How to Use the Compound Interest Calculator
- Enter your starting amount (principal)
- Enter the annual interest rate (%)
- Select your compounding frequency (daily, monthly, quarterly, or annually)
- Enter the number of years
- Click Calculate to see your final balance and total interest earned
What Is Compound Interest?
Compound interest is interest calculated on both your initial deposit (the principal) and the interest you have already earned. This means your money grows faster over time because your interest earns interest — a snowball effect that becomes dramatically more powerful the longer you invest.
This is in contrast to simple interest, which is only calculated on the original principal and does not accelerate over time. The difference between the two grows significantly over long investment periods.
Compound Interest Formula
A = P × (1 + r/n)^(n × t)
- A = Final amount (principal + interest)
- P = Principal (starting amount)
- r = Annual interest rate (as a decimal, e.g. 5% = 0.05)
- n = Number of times interest compounds per year
- t = Time in years
Compound Interest Examples
| Principal | Rate | Compounding | Years | Final Balance | Interest Earned |
|---|---|---|---|---|---|
| £1,000 | 5% | Monthly | 5 | £1,283 | £283 |
| £5,000 | 6% | Monthly | 10 | £9,096 | £4,096 |
| £10,000 | 7% | Monthly | 20 | £40,388 | £30,388 |
| £20,000 | 5% | Monthly | 30 | £88,774 | £68,774 |
How Compounding Frequency Affects Growth
The more frequently interest compounds, the faster your balance grows. Here is how different compounding periods compare on a £10,000 investment at 5% over 10 years:
| Compounding Frequency | Times Per Year | Final Balance | Extra vs Annual |
|---|---|---|---|
| Annually | 1 | £16,289 | — |
| Quarterly | 4 | £16,436 | +£147 |
| Monthly | 12 | £16,470 | +£181 |
| Daily | 365 | £16,487 | +£198 |
The Power of Starting Early
Time is the single most powerful factor in compound interest. Starting just 10 years earlier can nearly double your final balance with the same investment and rate:
- Invest £5,000 at age 25 at 7%/year → £74,872 by age 65
- Invest £5,000 at age 35 at 7%/year → £37,857 by age 65
- Invest £5,000 at age 45 at 7%/year → £19,348 by age 65
Same money, same rate — but starting 20 years earlier produces nearly four times the result. This is why financial advisers consistently say: start investing as early as possible.
Simple Interest vs Compound Interest
Here’s how simple and compound interest compare on £10,000 at 5% over 20 years:
| Type | Interest Earned | Final Balance |
|---|---|---|
| Simple interest | £10,000 | £20,000 |
| Compound (annual) | £16,533 | £26,533 |
| Compound (monthly) | £17,137 | £27,137 |
Compound Interest FAQ
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus accumulated interest, meaning your earnings grow faster the longer you invest. Over 20+ years, the difference can be substantial.
How do I calculate compound interest monthly?
Use the formula A = P × (1 + r/12)^(12 × t), where r is your annual rate as a decimal. Or simply use this calculator and select “Monthly” as your compounding frequency — it does the calculation instantly.
Does compound interest work on debt?
Yes — and it works against you on debt. Credit card balances, loans, and overdrafts all compound, which is why unpaid debt can grow very quickly. Paying off high-interest debt early saves significantly more than the headline rate suggests. Use our loan calculator to see the full cost of borrowing.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your money. Simply divide 72 by your annual interest rate. At 6%, your money doubles in roughly 72 ÷ 6 = 12 years. At 8%, it doubles in just 9 years.
What investments use compound interest?
Savings accounts, ISAs, stocks and shares ISAs, pension funds, bonds, and dividend-reinvesting investment accounts all benefit from compounding. The key is that returns are reinvested rather than withdrawn — allowing interest to build on interest over time.
Related Calculators
- Interest Calculator — Calculate simple interest on savings or loans
- Savings Calculator — See how regular savings contributions grow over time
- Loan Calculator — Estimate monthly repayments on any loan
- ROI Calculator — Calculate return on investment for any project
- Mortgage Calculator — Calculate monthly mortgage payments and total interest