This calculator is designed to give an example of how your savings could grow. The figures shown aren’t guaranteed, as actual returns will depend on interest rates, product terms, tax, and your personal circumstances. It doesn’t take into account inflation or charges, and it shouldn’t be relied on as financial advice.
How does compound interest work?
Each time your savings earn interest, that interest is added to your total balance. So you earn interest on the combined amount – your original savings contribution plus the interest already earned.
That cycle keeps repeating. And the longer you leave it to grow, the bigger your balance gets. Given time, the results can be powerful. And the earlier you start, the more time compound interest has to work its magic.
When it comes to compounding, consistency counts. And where you place your money matters. Watch our video to learn more.
How our compound interest calculator works
To work out your results, our calculator assumes the following:
- All cash, including any interest earned, stays invested for the entire timeframe.
- The interest rate stays the same for the whole timeframe.
- Interest is calculated and added at the end of each day, month, or year (depending on the compounding frequency you select), after any regular contributions have been added.
- Regular contributions stay the same amount for the entire timeframe.
Compound interest FAQs
Where can I put my money to earn compound interest?
In the UK, you can earn compound interest through savings accounts, fixed-rate bonds, Cash ISAs, and by reinvesting the returns from Stocks & Shares ISAs and pensions. These options all benefit more the longer you leave your money invested.
What is the 8-4-3 rule of compounding?
It’s a rule of thumb that shows how savings can potentially grow over time, and why patience pays off:
- In the first eight years, your money grows – slowly but steadily.
- In the next four years, momentum builds – the gains become more noticeable.
- In the final three years, the pace accelerates – your savings grow faster than before, without you lifting a finger.
How do I make the most of compound interest?
Compound interest has the most impact when savings are left untouched, and interest is allowed to build over time. Here are some ways to maximise growth:
- Explore accounts with competitive rates
- Minimise withdrawals to help your total balance grow
- Add to your savings regularly
- Check how often interest is added – more frequent compounding can lead to higher returns
Does monthly vs. annual compound interest make a difference?
Yes, there is a difference between monthly and annual compound interest. Monthly compounding can earn slightly more than annual compounding, and the difference tends to grow over longer periods.
How does inflation affect compound interest over 20 years?
Inflation can erode the purchasing power of your savings, even when compound interest is applied.
For example, if a savings balance grows at 4% a year while inflation runs at 3%, the real rate of growth would be closer to 1%.
Although your savings balance would increase by 4% annually in nominal terms, its spending power would grow much more slowly.
Over 20 years, £100,000 growing at 4% would rise to around £219,000. But once 3% inflation is taken into account, this would be worth closer to £122,600 in today’s money.
Is it better to compound in a cash ISA or savings account?
Whether a Cash ISA or a savings account is better for compounding will depend on interest rates, tax, and how you plan to use your money.
Cash ISAs offer tax-free interest. This is ideal for higher or additional-rate taxpayers who have little or no Personal Savings Allowance. Savings accounts don’t usually have contribution limits, but any interest above your allowance may be taxable.
Access also matters. Instant Access accounts offer flexibility, while Fixed Rate accounts may offer higher rates but restrict withdrawals. In some cases, a high‑interest savings account can deliver better returns than a Cash ISA – even after tax. But this will vary by individual.
Don't let your money sit still
Too much of the UK’s cash is asleep. Over £1tn sits in low-interest savings accounts, earning far less than it could. That’s not just a missed opportunity. It’s a wake-up call.
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