Home / Trading / Compound interest calculator
Compound interest calculator
See how a starting sum and regular payments grow at a rate you choose, year by year, with the effect of charges, inflation and how often interest is added.
We do not give financial advice, and we make no promises about returns. This calculator only does the arithmetic on the figures you enter. Read the full notice.
Rate and time
Your own figure, for example your savings account’s rate. We do not suggest or forecast rates.
Shows the result in today’s money. Your own assumption.
Fine-tune: charges, rising payments, a goal
Platform and fund charges, as a percentage of the balance, taken off each year.
We show when you would reach it, and the payment that reaches it in time.
Balance at the end
-
Growth earned
-
Working
| Year | Balance | Paid in so far | Growth so far | In today’s money |
|---|
The rate is yours to choose, and the result is only as good as that figure: growth from investments is not steady and can be negative. Figures are before tax. Nothing you type is stored or sent anywhere.
How it works
- Effective annual rate = the AER as entered, or for a nominal rate (1 + rate ÷ times added a year)times added a year − 1, or erate − 1 when added continuously
- After yearly charges = (1 + effective rate) × (1 − charges) − 1
- Each month, the balance grows by (1 + rate after charges)1/12 − 1, with payments added at the start or end of the month they fall in
- In today’s money = balance ÷ (1 + inflation)years
- Payment that reaches a goal = (goal − what the starting sum alone grows to) ÷ what a payment of 1 grows to
Working month by month means quarterly and yearly payments land in the right month, and a term such as 7 years and 5 months is handled exactly. A one-off sum with interest added yearly gives the textbook answer: £10,000 at 5% for ten years is £16,288.95.
Questions
How does compound interest work?
Interest is added to your balance, and the next round of interest is worked out on the bigger balance. Over long periods the interest earned on earlier interest becomes most of the growth. £10,000 growing at 5% a year, added once a year, becomes £16,288.95 after ten years: £6,288.95 of growth, where simple interest would have given £5,000.
What rate should I use?
Your own. The calculator does not suggest, forecast or assume any rate. For a savings account, use the rate the provider quotes. For anything that can go down as well as up, a single fixed rate is a simplification: real returns vary from year to year and can be negative, so try more than one figure.
What difference does the compounding frequency make?
If you choose a nominal rate, the more often interest is added, the more you end up with, because interest starts earning interest sooner: 5% added monthly is the same as about 5.12% a year. UK savings accounts quote an AER (annual equivalent rate), which already includes this, so leave the setting on AER and it is used as it is.
Should my contributions go at the start or the end of each month?
Choose whichever matches what you do. Money paid in at the start of a period earns interest for that period, so it ends up slightly ahead of the same payments made at the end.
What does the inflation figure do?
It shows what the final balance would buy in today's money, at the inflation rate you enter. It does not change the balance itself. Leave it blank to skip it.
Does it take off tax?
No. The figures are before any tax. Whether tax is due depends on the account, such as an ISA or a pension, and on your own circumstances.
Can I model taking money out?
Yes. Set the regular payment to Taken out and the calculator takes it from the balance at the frequency you choose. If the balance runs out before the end, it says in which month. It is arithmetic at a steady rate; real withdrawals from investments face returns that vary, which can make money run out sooner or later.
Is anything I enter stored or sent anywhere?
No. The calculator runs in your browser. Nothing you type is stored or sent anywhere.
What this is, and what it is not
This calculator carries out the arithmetic on the figures you enter. It does not forecast returns or recommend any savings account or investment, and its output is not advice. BrightDragon Systems Ltd is not authorised or regulated by the Financial Conduct Authority and does not provide regulated financial services.
Real rates change over time. Investments can fall as well as rise, and you may get back less than you put in. Check the terms of any account or product with its provider.
More free tools for traders & investors: all of them in one place.
Contact us
Use the form or email us directly. We respond to every enquiry within 24 hours, 365 days a year.
Bespoke work starts with a paid consultation, credited in full against the build.