Compound Interest Calculator
See how your money grows over time with the power of compounding. Add monthly contributions to maximise your results.
| Year | Balance | Interest This Year | Total Contributions |
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How to use this calculator
Takes about 2 minutes.
- Enter your starting amount (principal) in the Starting Amount field
- Set the annual interest rate you expect to earn
- Pick the number of years you'll let the money grow
- Choose how often interest compounds — daily, monthly, quarterly, or yearly
- Add an optional monthly contribution and click Calculate to see your final balance and year-by-year growth
Try these scenarios
Tap a scenario to load it into the calculator above.
Methodology & Sources
This calculator implements the standard compound-interest formula: A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) / (r/n)]. Region-specific tax and rate defaults are sourced directly from each country's primary government source and reviewed against the publication date below.
- USA: IRS — federal income tax brackets and contribution limits.
- UK: GOV.UK — HMRC personal allowance, National Insurance, and dividend rates.
- SA: SARS — personal income tax brackets and tax rebates.
Last verified: May 2026.
Key concepts
Principal vs. interest. Your principal is the money you put in; interest is what the bank or market pays you for letting it sit. Compounding means the interest you earned in year one starts earning its own interest in year two — and the effect snowballs over decades.
Compounding frequency. Interest can be credited annually, monthly, or daily. More frequent compounding gives a slightly higher effective return, but the gap is small compared with what changing the headline rate or time horizon does.
Rule of 72. Divide 72 by your annual rate to estimate how many years it takes your money to double. At 7%, that's roughly 10 years; at 10%, about 7.
Real vs. nominal returns. A 7% nominal return with 3% inflation is only a 4% real return in purchasing-power terms. For long-horizon planning, focus on real returns. The U.S. S&P 500's long-run real return is about 7% before taxes (Federal Reserve and Robert Shiller data).
Tax wrappers matter. Compounding inside an ISA (UK), Roth IRA (US), or TFSA (SA) is tax-free; outside, interest is taxed annually at your marginal rate, which slows growth materially over 20+ years. US savers comparing Roth, Traditional, and taxable brokerage growth side-by-side should use our dedicated IRS-aware compound interest calculator, which applies 2026 IRA / 401(k) contribution limits and federal marginal rates against the same compound-interest engine.
Frequently Asked Questions
Worked example — £200/month into a UK Stocks & Shares ISA at 6%
Picture a 25-year-old in Manchester opening a Stocks & Shares ISA with Vanguard or AJ Bell and committing £200 a month into a low-cost global equity fund. They have nothing in the ISA yet and want to see what 40 years of steady contribution might look like. A 6% nominal annual return is a conservative working assumption — broadly consistent with the Bank of England's long-run UK equity returns and below the FTSE All-World 10-year averages from index providers like MSCI.
The compound interest formula used by this calculator is A = P(1+r/n)^(nt) + PMT × [((1+r/n)^(nt) − 1) / (r/n)], where P is the starting principal, PMT is the contribution per compounding period, r is the annual rate, n is compounding periods per year, and t is years. With P=0, PMT=£200, r=0.06, n=12 (monthly compounding), and t=40, the maths runs as follows. Each £200 contribution earns 0.5% per month (0.06/12). The future value of an annuity factor over 480 months is [(1.005)^480 − 1] / 0.005 = 1,990.97. Multiplied by £200, the final balance lands at roughly £398,194. Total contributions across 40 years were £96,000, so growth contributed about £302,000 — over three pounds of growth for every pound saved.
Shift one variable and the answer moves substantially. Push the contribution to £300/month and the balance jumps to £597,291. Cut the term to 30 years (still £200/month) and the balance falls to £201,908 — barely half the 40-year figure, despite contributing 75% of the same money. That asymmetry is the back-loading of compound interest in action: the last decade contributes more growth than the first three decades combined. It is the central argument for starting early, even with small amounts, rather than waiting until contributions can be larger.
Common compound-interest mistakes
- Confusing APR with APY. Annual Percentage Rate is the simple headline rate; Annual Percentage Yield includes the effect of compounding. A 6% APR compounded monthly is actually 6.17% APY. For accurate compound projections, enter the APR with the correct compounding frequency — the calculator handles the conversion internally.
- Using monthly rate when the formula expects annual. A common manual error is entering 0.5% as the rate (the monthly rate) rather than 6% (the annual rate). The calculator's rate field expects the annual headline number; the monthly conversion is handled by the compounding-frequency dropdown.
- Ignoring the fee drag. A 6% gross return inside a fund charging 0.8% per year is a 5.2% net return. Over 40 years, that 0.8% drag removes roughly £75,000 from the worked example above. Always enter the net-of-fees rate, or accept that the projection overstates the achievable balance.
- Forgetting inflation. A £398,000 projection in 40 years is not the same as £398,000 today. At 2.5% UK inflation, that final balance is worth roughly £148,000 in today's money — still a real gain over £96,000 contributed, but smaller than the headline suggests. Run a second projection using the real (after-inflation) return for a purchasing-power view.
- Mistaking compounding frequency for the main lever. Switching from annual to daily compounding adds only about 0.3% to a 40-year balance at 6%. The rate and the time horizon matter far more. Do not chase savings accounts that advertise "daily compounding" — chase the higher headline APY and the longer time in market.
How to read the results
The final balance is the headline number, but the more revealing line is the breakdown between contributions and interest. In a 10-year projection at 6%, contributions typically represent 80–85% of the final balance and interest 15–20%. In a 40-year projection, the split flips to 25/75 — three quarters of the pot is growth. That ratio is the single best argument for treating compounding as a time game rather than a contribution game; once you have enough time, the contribution amount becomes secondary.
The year-by-year table shows how growth accelerates. Year one's interest is small because the principal is small. By year 20 the annual interest credited often exceeds the annual contribution, and by year 30 it can exceed the cumulative contribution. Watch for the crossover year — once interest exceeds contribution, the portfolio is effectively self-funding its own growth. Use that crossover point as a target for when to start de-risking gradually, because by then the sequence of returns matters far more than future contributions.
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