Compound Interest Calculator

What It Does

Calculate how your money grows with compound interest. Enter the starting amount, annual interest rate, time horizon, and compounding frequency. See the final balance, total interest earned, and effective annual rate (EAR). This is not a forecast — it shows the mathematical result at a fixed rate.

Real-World Usage

Retirement planning: estimate how a 401(k) or IRA grows over decades. Education savings: project a 529 plan balance. Compare savings accounts: daily vs monthly compounding matters. Early investors benefit most — $10,000 invested at 25 grows to over $100,000 by 65 at 6% monthly compounding. The calculator shows the time value of money and why starting early beats investing more later.

Local Context

The UK offers ISAs (Individual Savings Accounts) with a £20,000 annual tax-free allowance. Lifetime ISAs offer a 25% government bonus up to £1,000 per year for first-time buyers or retirement. Pension contributions get tax relief at your marginal rate. The FTSE 100 and global index funds are common investment vehicles.

What is compound interest?

Compound interest means you earn interest on both your original principal AND the interest you've already earned. Over time, this creates exponential growth — your money grows faster than simple interest.

How does compounding frequency affect growth?

More frequent compounding yields higher returns. Daily compounding earns slightly more than monthly, which earns more than annual. The difference grows larger with higher rates and longer time periods.

What's a good rate of return to expect?

Historical stock market returns average 7-10% annually (before inflation). High-yield savings accounts offer 3-5%. Bonds typically yield 2-5%. Your actual returns depend on your investment choices and market conditions.