Compound Interest Calculator
See how a starting balance and regular monthly contributions grow over time. Adjust the rate, compounding frequency, and timescale — the chart, narrative, and year-by-year table update instantly, and every result has a shareable link.
Effective annual rate: 5.12%
Year-by-year breakdown
| Year | Contributed | Interest earned | Balance |
|---|---|---|---|
| 1 | £3,000.00 | £581.33 | £13,581.33 |
| 2 | £3,000.00 | £764.56 | £17,345.89 |
| 3 | £3,000.00 | £957.16 | £21,303.06 |
| 4 | £3,000.00 | £1,159.62 | £25,462.67 |
| 5 | £3,000.00 | £1,372.43 | £29,835.11 |
| 6 | £3,000.00 | £1,596.13 | £34,431.24 |
| 7 | £3,000.00 | £1,831.28 | £39,262.52 |
| 8 | £3,000.00 | £2,078.46 | £44,340.98 |
| 9 | £3,000.00 | £2,338.28 | £49,679.27 |
| 10 | £3,000.00 | £2,611.40 | £55,290.66 |
How does compound interest work?
Compound interest means you earn interest on your interest. Each period, the rate is applied to your whole balance — original deposit plus everything it has already earned — so growth accelerates over time rather than staying linear.
For a lump sum, the standard formula is A = P(1 + r/n)nt, where P is your starting balance, r the annual rate as a decimal, n the number of compounding periods per year, and t the time in years. Monthly contributions are added at the end of each month and then compound along with the rest of the balance.
Worked example
Start with £10,000, add £250 a month, and earn 5% compounded monthly for 20 years. You would contribute £70,000 in total, earn £59,885 in interest, and finish with £129,885. The interest alone is more than your original £10,000 — that is compounding doing the work.
Frequently asked questions
How is compound interest calculated?
Compound interest is calculated by applying the interest rate to your balance repeatedly, so each period you earn interest on both your original money and the interest already earned. The formula for a lump sum is A = P(1 + r/n)^(nt), where P is the starting balance, r the annual rate as a decimal, n the number of compounding periods per year, and t the number of years.
What difference does compounding frequency make?
More frequent compounding earns slightly more: £10,000 at 5% for 10 years grows to £16,288.95 compounded annually but £16,470.09 compounded monthly. The gap grows with higher rates and longer time horizons, but frequency matters far less than the rate itself and how early you start.
Are monthly contributions included in the calculation?
Yes. This calculator adds your contribution at the end of every month and compounds the whole balance each period, the same way a regular savings or investment plan works. The chart splits your final balance into money you put in versus interest it earned.
Is compound interest calculated before or after tax?
This calculator shows gross growth before tax. Depending on your country and account type (e.g. a UK ISA or US Roth IRA), interest may be tax-free or taxable; check the rules that apply to your account.