How does compounding frequency matter?

More frequent compounding raises effective yield: 8% annual → 8.00%; monthly → 8.30%; daily → 8.33%. Contributions dominate frequency over long horizons, though.

What is the Rule of 72?

Years to double ≈ 72 ÷ rate. At 8%, ~9 years; at 6%, ~12 years. For tripling use 114, for real (inflation-adjusted) doubling use 72 ÷ real rate.

Simple vs compound interest?

Simple pays only on principal (P·r·t, linear). Compound reinvests (exponential). Over 20y at 7%, £10k simple → £24k; compound annual → £38.7k.

Are projections guaranteed?

No — markets vary, rates change, inflation bites. Use 4–6% real for equity-heavy plans, 1–3% for cash, and rerun yearly.

How do monthly contributions grow?

As an annuity: each payment compounds for its remaining months. £200/mo at 8% for 10y grows to ~£36.6k from £24k paid.

Financial · Free tool

Compound Interest Calculator

Growth on growth — future value with contributions shown yearly.

Simple interest is paid only on the money you put in. Compound interest is also paid on the interest you've already earned, so growth speeds up the longer you leave it. At 8% a year, £10,000 grows to about £21,589 in ten years if interest is added once a year, or about £22,196 if it's added monthly. Add £200 a month on top and the total reaches about £58,786.

The same effect works against you on debt. At 8% money roughly doubles in nine years (the rule of 72: 72 ÷ 8 = 9), but a credit card balance at 24% doubles in about three. Fees compound too: a 1% yearly charge on an investment growing at 7% leaves you with only about three-quarters of the pot after 30 years.

Enter a starting amount, the annual rate, the number of years, how often interest is added and any monthly contribution. The results are before inflation and tax unless you lower the rate to allow for them.

By DailyCalc Editorial Team · Updated 2026-10-03 · 8-min read · 3 sources cited

● Compound calculator

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Compound-interest formula

A = P(1 + r/n)^(nt) + contributions × [((1+rm)^M − 1) ÷ rm]

The first term compounds the lump sum P at nominal rate r, n times per year for t years. The second term is the future value of a monthly annuity: each contribution compounds for its remaining months at monthly rate rm = r/12 over M = 12t months. More frequent n raises the effective annual rate: (1+r/n)ⁿ − 1.

P: Initial lump sum invested on day one.
r: Nominal annual rate as decimal (8% → 0.08). Use expected net return after fees.
n / t: Compounds per year (1/2/4/12/365) and years invested. Contributions assumed monthly.

Worked example: £10,000 at 8%, 10y, £200/mo, monthly compounding

A Stocks & Shares ISA illustration (before fees/inflation):

Lump growth: 10,000 × (1+0.08/12)^120 ≈ 10,000 × 2.2196 = £22,196.
Contributions: £200 × 120 = £24,000 paid in.
Contribution growth: 200 × ((1.0066667^120 − 1) ÷ 0.0066667) ≈ 200 × 182.946 = £36,589.
Add the two pots: £22,196 + £36,589 = £58,786 (the calculator shows £58,785.61 before rounding).
Interest earned: £58,786 − (£10,000 + £24,000) = £24,786 — about 42% of the final pot is growth.

Result: Future value ≈ £58,786 from £34,000 paid in — £24,786 of compound growth.

How to use this calculator

Model reality, not brochures.

Step 1: Enter principal

Lump sum today. Use 0 for pure monthly savers (SIP-style).

Step 2: Enter rate and years

Use net expected return (e.g. 7% gross − 0.8% fees = 6.2%). Longer horizons amplify compounding dramatically.

Step 3: Set frequency

Monthly (12) matches most savings; daily (365) for offset/credit math; annual (1) for conservative illustrations.

Step 4: Add monthly contribution

What you will actually auto-invest. Even £100/mo transforms 20-year outcomes — test £0 vs £200.

When to use it

Goals where compounding makes the biggest difference:

Retirement saving

£300 a month at 6% for 30 years grows to about £301,000 from £108,000 paid in. Starting five years earlier, and saving for 35 years, gives about £427,000.

A house deposit

£500 a month at 4% for five years builds about £33,000. Raising it to £650 a month gets you to roughly £43,000.

Education saving

₹10,000 a month at 10% for 12 years grows to about ₹27.6 lakh from ₹14.4 lakh invested, so nearly half the final amount is growth.

Understanding debt

A £3,000 card balance at 24% roughly doubles in three years if you only make small payments. Overpaying or moving it to a cheaper rate makes a big difference.

Checking fees

Compare the same investment at 7% and at 6% to see what a 1% annual fee costs you. Over 30 years, it takes about a quarter of the final value.

Tips

Make compounding work for you:

Allow for inflation. A 7% return with 2.5% inflation is about 4.4% in real terms; enter that rate to see results in today's money.
Raise your monthly contribution a little each year, for example in line with pay rises. Small increases add up over long periods.
Compare savings accounts by their AER or effective rate. 8% compounded monthly is equivalent to 8.30% a year.
Reinvest dividends and interest rather than spending them, or compounding stops working on that money.
As you get closer to needing the money, consider moving some of it into lower-risk investments.

Common mistakes

Things that make projections look better than reality:

Forgetting inflation

£300,000 in 30 years' time, with 2.5% inflation, would buy about what £143,000 buys today.

Choosing on return alone

A higher but more volatile return only helps if you stay invested through the bad years. Many people sell after a large fall and miss the recovery.

Ignoring tax

The same 6% return taxed down to about 4.5% leaves you roughly 40% worse off after 25 years than if it grew in a tax-free account such as an ISA or pension.

Worrying about timing

Investing at the start or end of each month changes the result by only about one month's growth. Setting up automatic monthly investing matters far more.

Sources & references

The formula, thresholds and guidance on this page were checked against these primary sources. Written and reviewed by DailyCalc Editorial Team; last updated 2026-10-03. Spotted an error? Tell us.

Disclaimer: Illustrative projections only — not financial advice. Markets can fall. Past performance does not predict future returns. Consider fees, inflation and tax.

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