Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. It is the fundamental force behind long-term wealth building — and the reason starting early matters so much more than investing larger amounts later. Einstein reportedly called it the eighth wonder of the world, and while that attribution is disputed, the mathematical power is not.

The difference between simple and compound interest grows dramatically over time. Investing £10,000 at 7% simple interest gives you £17,000 after 10 years. With compound interest, the same investment grows to £19,672 — and after 30 years, the gap is £31,000 versus £76,123. The Rule of 72 provides a quick mental shortcut: divide 72 by the annual return rate to estimate how many years it takes to double your money. At 7%, your money doubles roughly every 10.3 years.

How to Use This Calculator

1. Enter your initial investment (lump sum)
2. Add any regular monthly or annual contributions
3. Set the expected annual interest/growth rate
4. Choose the compounding frequency (monthly, quarterly, or annually)
5. Set the time period and view the growth chart showing contributions vs compound growth

Key Facts

More frequent compounding produces slightly higher returns — monthly compounding at 6% yields an effective annual rate of 6.17%. A 25-year-old investing £200/month at 7% until age 65 accumulates approximately £480,000, of which only £96,000 is contributions — the rest is compound growth. Starting the same contributions at 35 yields only £227,000. This demonstrates why time in the market, not timing the market, is the most reliable wealth building strategy. Within an ISA, all growth is tax-free, maximising the compound effect.