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Compound Interest Calculator

Watch your money grow with compound interest — interest on interest. See the full year-by-year breakdown and compare with simple interest to understand the real difference.

COMPOUND INTEREST CALCULATOR

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How often interest is added to your balance

Step-by-step solution

A = P × (1 + r/n)n×t

Year-by-year growth

Year Opening balance Interest earned Closing balance Total interest

Compound Interest Calculator Explained

Core concepts, classroom applications, and plain-English explanations for all audiences.

Why this matters more than anything else in maths

Put £1,000 into a savings account at 7% at age 20. By 60, you have £14,974 — without touching it. Wait until 40 to do the same thing, and you only get £3,870 by 60. Same money, same rate, 20 years difference: a gap of over £11,000. That's compound interest.

Worked example

"You invest £2,000 at 6% compounded annually for 5 years. How much do you have?"

Formula: A = P × (1 + r/n)^(n×t)

A = 2000 × (1 + 0.06)^5

A = 2000 × 1.3382

Result: £2,676.45

Interest earned: £676.45

vs simple interest: £600 flat

The extra £76.45 came from interest earning interest — the compound effect.

It works against you too

  • → Credit cards: 24% APR, compounded monthly. £500 left unpaid becomes £620 in a year if you only pay the minimum.
  • → Mortgages: overpaying by £100/month on a £200,000 mortgage saves thousands in interest over the term — because less principal means less compound growth on the debt.

The Rule of 72 shortcut

Divide 72 by the interest rate to estimate how long it takes to double. At 6%, that's 72 ÷ 6 = 12 years. At 9%, just 8 years. Works surprisingly well between 2% and 15%.

Good to know

The power of compound interest

Interest on interest: the snowball
With simple interest, you earn the same fixed amount every year. With compound interest, each year's interest is added to the balance — so next year you earn interest on a bigger number. The effect is slow at first but accelerates significantly over time.
Year 1: £50 interest (on £1,000)
Year 5: £61 interest (on £1,216)
Year 10: £78 interest (on £1,551)
Same rate — bigger number each year
The Rule of 72
A quick mental shortcut: divide 72 by the annual interest rate to estimate how many years it takes to double your money. It's approximate but surprisingly accurate for rates between 2% and 15%.
At 6%: 72 ÷ 6 = 12 years to double
At 8%: 72 ÷ 8 = 9 years to double
At 4%: 72 ÷ 4 = 18 years to double
Actual at 6%: £1,000 → £2,012 in 12yr
Compounding frequency matters
The more often interest is compounded, the more you earn — but the difference between monthly and daily is small. The rate matters far more than the frequency. Switching from annual to monthly compounding at 5% adds around 0.12% effective return per year.
£1,000 at 5% for 10 years:
Annually: £1,628.89
Monthly: £1,647.01 (+£18.12)
Daily: £1,648.61 (+£19.72)
Works both ways
Compound interest on debt
Compound interest works the same way on debt — and it works against you. Credit card balances, payday loans and overdrafts compound too, often monthly or daily. A balance you don't pay off grows faster each month, which is why small debts can snowball quickly.
£1,000 credit card at 24% APR:
Year 1: £1,240 (+£240)
Year 3: £1,907 (+£907)
Year 5: £2,931 (+£1,931)