How to use
- 1Enter your starting amount, monthly contribution and annual interest rate.
- 2Set the number of years and how often interest is compounded (yearly, quarterly, monthly or daily).
- 3Optionally add a tax rate on interest and an inflation rate.
- 4Read the final balance, total contributions and interest, and the yearly table and chart.
How compound interest works
With compound interest you earn interest on your interest. The balance after t years is P × (1 + r/n)^(n·t), where P is the principal, r the annual rate and n the number of compounding periods per year. £10,000 at 5% compounded yearly grows to about £16,289 after 10 years — £1,289 more than the £15,000 that simple interest would give. Regular monthly contributions are added on top and earn interest as well.
Compounding frequency, tax and inflation
More frequent compounding increases the result slightly: 5% compounded monthly is equivalent to about 5.12% a year. Tax on interest reduces the growth each year, and inflation reduces what the final amount can buy — the inflation-adjusted figure shows the balance in today’s money. In the UK, interest inside an ISA is tax-free; in the US, interest in a regular savings account is taxed as ordinary income.
Simple interest
Separate tabs calculate simple interest and a term deposit by day count (principal × rate × days ÷ 365, with optional tax). Simple interest is paid only on the original principal: interest = principal × rate × time. It is useful for short-term deposits and loans that do not compound. The rule of 72 gives a quick estimate of compound growth: divide 72 by the interest rate to get roughly how many years it takes to double your money.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount; compound interest is also paid on interest already earned, so the balance grows faster over time.
How long does it take to double my money?
Roughly 72 divided by the annual rate in years — about 10 years at 7%, or 14 years at 5%.
Does monthly compounding make a big difference?
Only a small one. At 5%, monthly compounding equals an effective annual rate of about 5.12%.
Are the results guaranteed?
No. They assume a constant rate; real savings and investment returns change over time.
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