Compound interest calculator.
How your money grows over time — with monthly contributions and compounding.
Why compounding adds up
Compound interest means you earn returns not just on your original deposit but on the returns it has already generated — interest on interest. Over a few years the effect is modest; over decades it dominates, which is why time in the market matters more than timing it. This calculator compounds monthly and adds your contribution each month, then splits the result into what you put in versus what the growth added. Two things drive the outcome more than people expect: the number of years (the curve steepens the longer it runs) and the regular monthly contribution, which often ends up contributing more to the final balance than the starting lump sum. It's an estimate with a fixed rate — real returns vary and ignore tax and inflation. To compare the cost of borrowing instead, see the loan calculator.
The formula behind it
The calculator uses the standard future-value formula for a lump sum plus a regular contribution: FV = P(1+r)ⁿ + PMT × [((1+r)ⁿ − 1) ÷ r]. Here P is your starting balance, PMT the amount you add each period, r the rate per period and n the number of periods. Because this compounds monthly, r is the annual rate divided by 12 and n is the number of years multiplied by 12 — a 7% annual rate becomes 0.5833% a month.
The single most common mistake is putting the annual rate straight into r without dividing it. That does not produce a slightly optimistic answer; it produces a wildly wrong one.
A worked example
Start with £5,000, add £200 a month, and assume 7% a year for 20 years. You contribute £53,000 in total (the £5,000 opening balance plus £48,000 of monthly deposits) and finish with roughly £124,000 — so about £71,000 of the final balance is growth rather than money you put in.
Run the same numbers over 10 years instead and the picture is very different: £29,000 contributed, around £44,700 total, and only about £15,700 of growth. Halving the time does not halve the growth, it cuts it by nearly four fifths. That asymmetry is the whole argument for starting early.
What the projection leaves out
A fixed rate is a modelling convenience, not a forecast. Real returns arrive unevenly, and the order in which good and bad years fall changes the outcome — particularly if you are drawing money out rather than paying it in.
- Inflation. The figure shown is nominal. If prices rise 3% a year, £124,000 in twenty years buys far less than £124,000 does today.
- Tax. Returns may be taxed on the way through or on the way out, depending on the account and your jurisdiction.
- Fees. An annual charge of 1% sounds trivial but compounds against you exactly as returns compound for you.
Treat the output as a way to compare scenarios against each other, not as a prediction of a specific future balance. This is general education, not financial advice.