How to use our Compound Interest Calculator
Compound interest is the interest earned on the initial amount saved, and on the interest already earned. Over time, it can help you to grow your savings. Our Compound Interest Calculator can be used to calculate the value of your savings based on the amount saved and the interest rate.
How to use our Compound Interest Calculator
To use our Compound Interest Calculator:
- Enter the lump sum
- Enter the annual interest rate
- Enter your monthly savings amount
- Enter the duration (in years)
Hit the "Calculate" button to see what your savings could be worth based on your inputs. Note that you can enter £0 as the lump sum or monthly savings amount.
The calculator makes the assumption that the interest is paid monthly.
Monthly savings example 1
Take the example where you start from £0 as the lump sum, but save £100 per month for 30 years at a 3% interest rate.
After the 30 years of regular savings, your pot could be worth £58,274.
When you compare this to the amount saved of £36,000 (£100 x 12 x 30), you can start to see the power of compound interest.
The total amount of interest earned comes to £22,274.
Monthly savings example 2
Let's take a similar example of monthly savings, where the total amount saved is also £36,000 - the same as the first example.
This time, let's see the effects of compound interest if it's saved over 10 years, i.e. £300 per month. We'll assume it's the same 3% interest rate.
When we input the numbers, we see that it could be worth £41,922.
This is substantially less than our first example, and it demonstrates the power of time. The longer the duration, the bigger the impact that compound interest can have on your savings.
Summary
The key take away from the above examples is to start as early as possible when it comes to saving.
Try out our Compound Interest Calculator yourself to see how the power of compound interest could benefit you and your savings.
This does not constitute financial advice. Always do your own research.