See how compound interest grows any investment with daily, monthly, or annual compounding.
£10,000.00 invested for 10 years at 7% compounded monthly grows to £20,096.61 — of which £10,096.61 is interest.
Breakdown
- Initial principal
- £10,000.00
- Total contributions
- £0.00
- Total interest earned
- £10,096.61
- Effective annual rate
- 7.229%
Show your working
If the rate were different
| Annual rate | Final balance | Interest earned |
|---|---|---|
| 6% | £18,193.97 | £8,193.97 |
| 7% | £20,096.61 | £10,096.61 |
| 8% | £22,196.40 | £12,196.40 |
Same principal, contributions and term — only the rate changes.
Assumptions
- Interest is compounded monthly and reinvested in full; between compounding dates it accrues evenly.
- The rate stays fixed for the whole term.
- Contributions, where entered, are added at the end of each month after interest.
- Tax, fees and inflation are not deducted.
Balance Growth by Year
| Year | Balance | Interest (Year) | Total Interest | Total Contributions |
|---|
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Compound interest facts
- What does £10,000 grow to at 7% over 10 years?
- £20,096.61 with monthly compounding — £10,096.61 of that is interest.
- What does compounding frequency change?
- It decides how often interest starts earning interest. At 7% nominal, compounding monthly gives an effective annual rate of 7.229%.
- How long does money take to double at 7%?
- About 9.9 years compounded monthly. The “rule of 72” estimate (72 ÷ 7) gives 10.3 years, so it is close but slightly pessimistic.
- How is compound interest different from simple interest?
- Simple interest is paid only on the original amount. Compound interest is paid on the balance, so each period earns on every period before it.
How Compound Interest Grows Your Money
The Formula
A = P(1 + r/n)^(nt) where P = principal, r = annual rate, n = compounding periods per year, t = years. With monthly contributions, each payment also earns compound interest from the time it's made.
Rule of 72
A quick estimate: divide 72 by the annual interest rate to get the approximate years to double your money. At 7%, money doubles every ~10.3 years (72 ÷ 7 ≈ 10.3). This works because ln(2) ≈ 0.693.
Compounding Frequency
The more frequently interest is compounded, the more you earn. Daily compounding yields slightly more than monthly, which yields more than annual. The difference narrows as frequency increases, approaching continuous compounding (e^rt). Find your effective annual rate across multiple periods with the average return calculator.
Regular Contributions
Regular monthly contributions dramatically accelerate wealth growth. Adding just $200/month to a $10,000 principal at 7% over 20 years turns $10k into over $130k vs $38k without contributions — contributions account for much of the difference. To model long-term portfolio growth, try the investment calculator, or see how long your money will last once you start drawing it down.
Worked example
£5,000 invested at 6% compounded monthly for 10 years: A = 5,000 × (1 + 0.06/12)^(12×10) = 5,000 × (1.005)^120 = £9,096. Total interest earned is £4,096 — 82% more than the original principal, entirely from compounding.
What the Headline Rate Leaves Out
Inflation eats the nominal return
A pot growing at 5% while prices rise at 3% is gaining roughly 2% in real terms — what the money will actually buy. The approximation is simply the growth rate minus inflation; the exact figure is (1.05 ÷ 1.03) − 1 = 1.94%. Over long periods the gap compounds too, which is why a savings rate below inflation loses purchasing power every year even though the balance on the statement keeps rising. When you compare a projection here against a goal years away, it is worth running it once at the headline rate and once at the rate minus expected inflation.
AER is the number to compare
UK savings accounts advertise an AER (Annual Equivalent Rate), which restates the return as if interest were compounded once a year. That is precisely what makes it comparable: an account paying monthly and one paying annually can quote very different gross rates yet the same AER. Compare accounts on AER, and use the gross rate only when you need to model the actual payment schedule. Introductory bonus rates are usually included in the AER for the first year and vanish afterwards.
Tax applies to interest outside a wrapper
Interest earned in an ordinary savings account counts as taxable income. The Personal Savings Allowance lets most basic and higher-rate taxpayers earn some interest tax-free each year, with additional-rate taxpayers getting none; a cash ISA shelters interest entirely, up to an annual subscription limit. Both the allowance and the ISA limit are set by HMRC and can change each April, so check the current figures on GOV.UK before relying on them. This calculator projects gross growth and does not deduct tax.
Compounding works just as hard against you
The same mathematics drives debt. A credit card at 24% APR compounds monthly on any balance you carry, which is why a minimum payment can leave a balance barely moving for years. Before committing spare money to a savings account, compare the rate you would earn against the rate you are paying — clearing a 24% debt is a guaranteed 24% return, which no savings account will match. The interest calculator can model the debt side.
Evidence & Methodology
How This Page Is Grounded
Method
Applies compound growth to the starting balance and each contribution using the selected compounding frequency and contribution timing.
Important limitation: Uses a constant return and does not model tax, fees, inflation or market volatility.
Primary Sources
- Compound Interest Calculator Investor.gov — U.S. Securities and Exchange Commission
- Compound interest Investor.gov — U.S. Securities and Exchange Commission
Quality Checks
Checked against annual, monthly, zero-rate and no-contribution examples.
See how sources are selected and corrections are handled in our Editorial & Calculation Methodology, and which automated checks this page has to pass in How We Test.
Frequently Asked Questions
What is the compound interest formula?
Compound interest is calculated as A = P(1 + r/n)^(nt), where P is the principal, r is the annual rate, n is the number of compounding periods per year, and t is the number of years. Use the compound interest calculator above to see how your savings grow over time with optional monthly contributions.
What is the Rule of 72?
The Rule of 72 is a quick mental estimate: divide 72 by the annual interest rate to find the approximate number of years for your money to double. At 7% annual interest, your money doubles in roughly 10.3 years (72 ÷ 7 ≈ 10.3).
Does compounding frequency make a difference?
Yes — the more frequently interest is compounded, the more you earn. Daily compounding yields slightly more than monthly, which yields more than annual, though the difference narrows as frequency increases. Use the compound interest calculator to compare frequencies side by side.