How compound interest works
Compound interest is interest earned on both your original money and the interest already added. Over time this snowballs — the longer you save and the more often interest compounds, the faster your balance grows. Adding regular monthly or yearly contributions accelerates it further.
The calculator lets you set a starting amount, a regular contribution, an annual growth rate, the number of years and how often interest compounds. It then shows your final balance split into how much you paid in and how much is growth.
Worked example
Save £1,000 to start plus £100 a month at 5% a year for 10 years and you'd have about £17,240 — of which around £4,240 is interest on top of your £13,000 of deposits.
Frequently asked questions
What is compound interest?
It's interest paid on your original savings plus the interest already earned. Because you earn “interest on interest”, your balance grows faster over time.
How is compound interest calculated?
Each period, interest is added to the balance, and the next period's interest is calculated on the new, larger balance. This tool simulates that month by month.
Does compounding monthly beat annually?
Yes, slightly. More frequent compounding adds interest sooner, so it earns a little more than the same annual rate compounded once a year.
How much would £100 a month grow to?
Starting from zero at 5% for 10 years, £100 a month grows to roughly £15,500 — about £3,500 of that is growth on £12,000 of contributions.
Is investment growth guaranteed?
No. This is an illustration at a constant rate. Real investment returns vary and can fall as well as rise.