Calculate your future wealth with the power of compound interest
Final value
£95,878
Total interest
£30,878
Initial amount
£5,000
Total deposited
£65,000
Wealth growth over time
Deposits
Interest
Year-by-year breakdown
Year
Deposit
Interest
Total deposited
Total interest
Balance
0
£5,000
–
£5,000
–
£5,000
1
£6,000
£578
£11,000
£578
£11,578
2
£6,000
£1,038
£17,000
£1,615
£18,615
3
£6,000
£1,531
£23,000
£3,146
£26,146
4
£6,000
£2,058
£29,000
£5,204
£34,204
5
£6,000
£2,622
£35,000
£7,825
£42,825
6
£6,000
£3,225
£41,000
£11,051
£52,051
7
£6,000
£3,871
£47,000
£14,922
£61,922
8
£6,000
£4,562
£53,000
£19,484
£72,484
9
£6,000
£5,301
£59,000
£24,785
£83,785
10
£6,000
£6,092
£65,000
£30,878
£95,878
Compound interest and the snowball effect
Compound interest is what happens when your returns start earning returns of their own. Each year's growth is added to the balance, so the next year grows from a larger base. With an investment the figure is usually a return rather than a fixed rate of interest, but the arithmetic is the same.
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Small at first, huge in the end
The same idea is often called the snowball effect. A snowball rolled downhill picks up more snow with every turn, and because it is larger on each turn it gathers more than it did on the one before. A balance left to compound behaves the same way, and the longer it rolls, the more of its final size comes from the rolling rather than from the snow you started with.
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Time does more than the rate does
The shift shows up in what the balance is made of. With the calculator's own defaults — £5,000 to start, £500 a month, 7% a year — the summary above shows £95,878 after ten years, and £30,878 of that, 32.2%, is interest rather than money you paid in. Leave the same inputs running for thirty years instead, and it reaches £626,316, with interest making up £441,316 of it — 70.5%. The contributions never changed; each year simply had more to work on than the year before.
Simple interest vs. compound interest
The contrast with simple interest is where the effect becomes easy to see. Simple interest is always worked out from the amount you started with, so it pays the same figure every year and the total climbs in a straight line. Compound interest is worked out from the current balance, which already contains everything earned so far.
Simple interest — a straight line
The calculator opens with a starting amount of £5,000. Run that through flat, simple interest at 7% with no ongoing contributions, and it earns exactly £350 every single year. After ten years that is £3,500 in interest on top of the £5,000 you started with, for a total of £8,500.
Compound interest — a curve
Compound interest on the same £5,000 at 7% earns that same £350 in year one. But year two is worked out from £5,350 instead of £5,000, so it earns a little more, and every year after earns a little more than the one before. After ten years you hold £9,836 — £1,336 more than simple interest gave you, from the same starting amount at the same 7% rate.
Across a single year the difference between the two is small enough to dismiss, which is exactly why compounding is easy to underestimate. It is unremarkable in the short run and decisive over decades. The year-by-year table below is there to make that shape visible rather than leaving it to intuition.
Compounding has no preference for direction. A debt left unpaid grows by the same arithmetic on the same schedule: the balance rises, and the next charge is worked out from the higher figure. The snowball rolls either way, and which side of it you are on depends only on whether you are earning the return or paying it.
The rule of 72: how fast does it double?
There is a shortcut for a question people ask often: at a given return, how long until the balance doubles? Divide 72 by the annual return, and the answer is close enough to be useful without running the full calculation.
72 ÷ annual return (%) = years to double
At a 7% return: 72 ÷ 7 ≈ 10.3 years. Worked out exactly from the real formula, the answer is 10.2 years — close enough that the shortcut is worth knowing. It is also why the £5,000 example above reaches £9,836 rather than a clean £10,000 after ten years: ten years is just short of the 10.2 it actually takes to double.
The shortcut is most accurate for returns between about 6% and 10%. Outside that range the error grows on both sides, and grows faster at very low rates than at very high ones.
How to use this calculator
Start with the amount you already have. If you are beginning from nothing, leave it at zero and let the contributions do the work.
Enter what you add regularly, then choose whether that figure is monthly or yearly. Switching between the two converts the amount for you.
Set the annual return and the number of years with the two sliders. The chart, the totals and the table all update as you drag.
Read the year-by-year table underneath. It keeps what you paid in separate from what the interest added, so you can see the point where the interest starts to outgrow the deposits.
How this calculator works
A = P(1 + r/n)nt
Your starting amount grows by the standard compound interest formula, where P is the starting amount, r the annual return as a decimal, n how many times interest is added each year, and t the number of years.
Contributions are added on top. A monthly amount is treated as paid at the start of each month, so it earns interest for the part of the period it is present. A yearly amount is added at the end of the year. Daily compounding is converted to an equivalent monthly rate.
What changes the result
Time
A later year adds more than an earlier one at the same rate, because it compounds on a larger balance. The same £5,000 example earns £350 in interest in year one, but by year ten — compounding on a balance that has already grown for nine years — the same 7% rate earns £643. Of everything in this calculation, time is the lever with the most room to work.
Compounding frequency
How often interest is added makes less difference than most people expect. Run the same £5,000 at 7% for ten years and change only the compounding frequency: annually it reaches £9,836, monthly it reaches £10,048 — a real difference of £212, but a fraction of what changing the rate or the time would do.
Inflation, tax and fees
None of these show up in the number this calculator displays. The £5,000 example above reaches £9,836 after ten years, but with 2% inflation running the whole time, that is worth about £8,069 in today's buying power. Tax on gains and any ongoing account or fund fees reduce the figure further, and both compound against you the same way growth compounds for you.
Common questions
Can I save a calculation and come back to it?
Yes. The bookmark button in the header saves the current figures under a name you choose, and up to ten are kept. They stay in this browser only — nothing is uploaded, and they will not follow you to another device.
What return rate should I enter?
That is an assumption you make, not something this tool can answer for you. A common approach is to run the same calculation two or three times at different rates and compare the outcomes. Whatever you enter is applied evenly to every year, which no real market does.
Does the result account for inflation, tax or fees?
No. Every figure is shown in today's money, before tax and before costs. For a rough sense of buying power, subtract the inflation rate you expect from the return rate you entered and read the result as an approximation rather than a number.
Why do monthly contributions end up ahead of yearly ones?
A monthly amount is treated as paid at the start of each month, so every payment earns interest for the rest of the year. A yearly amount is added once the year is over and earns nothing during it. Paying the same annual total in monthly instalments therefore finishes slightly higher.
