Compound Interest Calculator
See how a single deposit grows over time. Compare daily, monthly, quarterly and yearly compounding side by side.
Starting from £10,000, the balance reaches £27,126 after 20 years at 5.116% effective AER.
| Year | Balance |
|---|---|
| 0 | £10,000 |
| 1 | £10,512 |
| 2 | £11,049 |
| 3 | £11,615 |
| 4 | £12,209 |
| 5 | £12,834 |
| 6 | £13,490 |
| 7 | £14,180 |
| 8 | £14,906 |
| 9 | £15,668 |
| 10 | £16,470 |
| 11 | £17,313 |
| 12 | £18,198 |
| 13 | £19,130 |
| 14 | £20,108 |
| 15 | £21,137 |
| 16 | £22,218 |
| 17 | £23,355 |
| 18 | £24,550 |
| 19 | £25,806 |
| 20 | £27,126 |
Your £10,000 grows to £27,126 over 20 years. 63.1% of the final balance comes from interest, not the deposit. Doubles around year 14.
- Your deposit (36.9%)
- Interest (63.1%)
For every £1 you started with, you ended up with about £2.71 after 20 years.
Information
Compound interest is the financial story behind every savings account, ISA, bond, and pension. The bank pays a rate (the headline figure they quote), credits it at some frequency, and each credit becomes part of the balance that earns the next round of interest. Over a long horizon that recursive accumulation produces a curve that looks almost linear at first and visibly accelerates later - see the chart above.
Nominal rate vs effective AER. UK banks must quote the AER (the effective annual rate) on savings products, but many providers advertise the nominal rate prominently and bury the AER. They aren't the same: a 5% nominal rate compounded daily earns about 5.127% effectively, because the small daily credits compound within the year. The caption under the rate input shows the effective AER you'd earn at the frequency you selected - change the frequency and watch it shift.
Does compounding frequency matter? Yes, but less than people expect. The table below shows the same starting amount + rate + term at all four frequencies side by side.
| Compounding | Effective AER | Final balance after 20 years |
|---|---|---|
| Daily | 5.127% | £27,181 |
| Monthly | 5.116% | £27,126 |
| Quarterly | 5.095% | £27,015 |
| Yearly | 5.000% | £26,533 |
What's not in this calculator. Three things to flag. (1) Monthly contributions on top of the starting deposit - covered by the dedicated Compound Interest with Monthly Contributions calc once it ships. (2) Inflation - the future balance shown above buys less than the same number of today's pounds; the full planner has real-vs-nominal toggles. (3) Tax - the figures here are gross. Whether you pay tax on the interest depends on the wrapper (ISA = tax-free up to £20,000/year, LISA adds a 25% bonus on up to £4,000/year, a regular savings account uses your Personal Savings Allowance).
FAQ
- What's the difference between AER and the nominal rate?
The nominal annual rate is the headline percentage a bank quotes. The effective AER is the actual yield you earn over a year once compounding is included. Daily compounding at 5% nominal produces an effective AER of about 5.127% - the extra 0.127% comes from earning interest on interest within the year. UK banks are required to quote AER on savings products so you can compare like-for-like. The caption under the rate input here shows the AER you'd earn at the frequency you selected.
- Does compounding frequency really matter?
Yes, but less than people expect. At 5% nominal over 20 years on £10,000, yearly compounding produces about £26,533, monthly produces £27,126, and daily produces £27,180 - a spread of roughly £647 between yearly and daily. The headline rate dominates: a 0.25% higher rate (5.25% vs 5%) is worth far more than switching from monthly to daily compounding. Use this calc's comparison table to see the spread at your exact inputs.
- Is the interest tax-free?
This calc shows gross figures - no tax is applied. Whether you pay tax on the interest depends on the wrapper: an ISA (£20,000 annual allowance) is fully tax-free; a LISA adds a 25% government bonus on contributions up to £4,000/year; a regular savings account uses your Personal Savings Allowance (£1,000 basic-rate, £500 higher-rate) before interest is taxed. Use the full planner to model the after-tax picture across wrappers.
- How long until my money doubles?
The line chart shows the doubling year directly - a vertical guide drops from the curve at the year the balance first crosses 2× your deposit, with a horizontal dashed line at the doubling height for visual reference. A quick mental shortcut is the Rule of 72: divide 72 by your rate. At 5% you'll roughly double in 72÷5 ≈ 14 years (the exact answer here, given monthly compounding, is 14 years). At 8% it's about 9 years; at 10% about 7 years.
- What's not modelled?
Three things: (1) monthly contributions on top of the starting deposit - those are covered by the dedicated Compound Interest with Monthly Contributions calc once it ships. (2) Inflation - your £27k future balance buys less than £27k of today's goods; the planner handles this via real-vs-nominal toggles. (3) Variable rates - savings rates change over time, especially when the Bank of England moves Bank Rate. This calc holds the rate fixed for the full term. The full planner models a rate path.
Sources
- Bank of England: Bank Rate (Bank of England)
Disclaimer
Not financial advice. The figures above are arithmetic on the inputs you provided. They don't account for tax on the interest, inflation eroding the purchasing power of your future balance, rate changes over time, or product-specific terms (minimum balances, fixed-term withdrawal penalties, ISA wrapper limits). Consult a qualified financial adviser before making a decision based on these numbers.
