Compound interest
Estimate how your money could grow with compound interest. Compare monthly vs yearly compounding while adding a fixed monthly contribution.
Assumes fixed monthly contributions and a fixed annual interest rate.
Results
These are estimates based on your inputs.
How this calculator works
We apply your contribution each month, then add interest either monthly or yearly depending on the selected compounding frequency. Monthly compounding applies a smaller rate each month, while yearly compounding adds interest once per year.
This is a simplified model for planning. Real savings accounts may compound daily and apply interest monthly.
What this calculator does
This compound interest calculator estimates how your money could grow over time when interest is reinvested. It includes monthly contributions so you can see the combined effect of saving regularly and compounding.
You can compare monthly vs yearly compounding to understand how frequency affects the final balance.
How the formula works
Each month, we add your contribution to the balance. If you choose monthly compounding, we apply a monthly interest rate derived from the annual rate. If you choose yearly compounding, we apply the annual rate once every 12 months.
The calculator then compares the final balance to your total contributions to show how much growth comes from interest.
Worked example
Example: start with £2,000, add £200 per month, earn 4% interest for 5 years. With monthly compounding, the final balance is roughly £16,500. With yearly compounding, it will be slightly lower.
The difference is the extra interest earned when interest is applied more frequently.
Common mistakes
- Assuming the interest rate never changes.
- Forgetting to include regular contributions.
- Confusing monthly compounding with monthly contributions.
- Expecting the result to match a specific account exactly.
When to use this calculator
Use this when planning savings or investments over time. If you have a fixed goal and want to calculate the monthly amount needed, use the Savings goal calculator.
FAQs
Is this the same as AER?
AER is a way to express annual interest including compounding. This calculator uses the rate you enter as the annual rate for calculations.
What if I make irregular contributions?
The calculator assumes a fixed monthly amount. Irregular contributions will change the outcome.
Why is monthly compounding higher?
Interest is applied more frequently, so you earn interest on interest sooner.