Compound Interest Calculator

What Is Compound Interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, compound interest grows exponentially — often called "interest on interest." It is the engine behind long-term investment growth and the reason debt can spiral rapidly.

Compound Interest Formula

A = P × (1 + r/n)^(n×t)

A = Final amount
P = Principal (initial investment)
r = Annual interest rate (decimal)
n = Compounding periods per year
t = Time in years

Example: £10,000 at 7% compounded monthly over 20 years: A = 10,000 × (1 + 0.07/12)^(240) = £40,388. Total interest earned: £30,388 — three times the original principal.

Simple vs Compound Interest

Feature	Simple	Compound
Calculated on	Principal only	Principal + interest
Growth	Linear	Exponential
Long-term result	Lower	Significantly higher

The Rule of 72 — Double Your Money

Years to double ≈ 72 ÷ Annual rate (%)

At 6%: 12 years to double
At 9%: 8 years to double
At 12%: 6 years to double

The Power of Starting Early

£5,000 invested at age 25 at 8%/year grows to £108,623 by age 65. Starting at 35 grows to only £50,313. Ten more years more than doubles the outcome.

Related Calculators

Loan Calculator — see compound interest working against you in debt. Mortgage Calculator — total interest cost over a full mortgage term.

Initial Investment ($)

Annual Interest Rate (%)

Monthly Contribution ($)

Investment Period (Years)

Compound Frequency

Financial Disclaimer: Results are estimates only and should not be relied upon as financial or investment advice. Consult a licensed financial advisor for guidance specific to your situation.

How to Use

1
Enter your initial investmentType the amount you are starting with (principal). Leave at 0 if starting from scratch.
2
Set interest rate and compoundingEnter the annual interest rate (e.g., 7 for 7%) and choose how often interest compounds: monthly, quarterly, or annually.
3
Add monthly contributions and timeEnter any regular monthly deposit amount and the investment period in years.
4
View your resultsSee your final balance, total contributions, and total interest earned, plus a year-by-year breakdown table.

Frequently Asked Questions

What is the difference between compound and simple interest?

Simple interest is calculated only on the original principal. Compound interest is calculated on both the principal and the accumulated interest. Over time, compound interest produces dramatically higher returns due to the "interest on interest" effect.

How often does compound interest compound?

Compounding frequency varies by product. Savings accounts typically compound daily or monthly. Most investment accounts compound monthly or quarterly. The more frequently interest compounds, the slightly higher the effective annual return.

What is the Rule of 72?

The Rule of 72 is a quick mental math shortcut: divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 6% interest, your money doubles in roughly 12 years (72 ÷ 6 = 12).

What interest rate should I use?

For long-term stock market investments, the historical average return of the S&P 500 is approximately 7-10% per year after inflation. For savings accounts, check your bank's current APY. For loan calculations, use the stated APR.

How does monthly contribution affect compound growth?

Regular monthly contributions dramatically accelerate compound growth. Each contribution immediately starts earning interest and compounds for the remaining investment period. Even small monthly amounts ($50-$200) can add tens of thousands to your final balance over 20-30 years.