Compound interest calculator
Project how your savings could grow with compound interest: set the starting capital, the monthly contribution, the estimated annual return and the number of years, and watch the year-by-year evolution.
Simple versus compound interest: the difference that changes everything
With simple interest, the interest is always calculated on the original amount. With compound interest, each period the interest is added to the capital and then starts earning interest of its own. It's the difference between a snowball sitting still and one rolling downhill. £1,000 at 5% a year earns £50 every year with simple interest, always. With compound interest, the first year is £50, but the second is worked out on £1,050, and the growth speeds up by itself.
The formula and what each letter means
Final amount = P × (1 + r ÷ n)^(n × t)Where P is the starting capital, r the annual rate as a decimal (5% is 0.05), n how many times a year it compounds (1 for yearly, 12 for monthly) and t the number of years. Monthly compounding pays slightly more than yearly because the interest is reinvested sooner, though at ordinary rates the difference is small.
Time matters more than the rate
What really drives compound interest isn't a sky-high rate but letting many years go by. £5,000 at 6% becomes about £9,000 after ten years, but more than £28,000 after thirty. That's why, for long-term saving, starting early usually counts for more than finding the perfect product.
The rule of 72, for mental maths
Here's a handy shortcut: divide 72 by the interest rate and you get, roughly, the number of years it takes your money to double. At 6%, about 12 years (72 ÷ 6); at 3%, about 24. It isn't exact, but it gives you a feel for things without a calculator.