See the power of compound interest. Watch your savings grow over time with regular contributions.
Compound interest is often called the eighth wonder of the world, and for good reason. Unlike simple interest, which is calculated only on your original deposit, compound interest earns interest on your interest. This creates a snowball effect where your money grows exponentially over time. The longer you leave your money invested, the more dramatic the effect becomes.
The more frequently your interest compounds, the more you earn. Monthly compounding means your interest is calculated and added to your balance twelve times a year, each time slightly increasing the base on which next month's interest is calculated. Daily compounding takes this even further. While the difference between monthly and daily compounding is relatively small, the difference between annual and monthly compounding can be significant over long periods.
Even small monthly contributions make an enormous difference over time. Investing £200 per month at 6% annual return for 20 years would grow to over £93,000 — even though you only contributed £48,000 of your own money. The remaining £45,000+ comes entirely from compound interest. Starting early and contributing consistently is far more powerful than trying to invest large lump sums later.
The interest rate you enter into this calculator gives you nominal returns — the raw growth of your money. In reality, inflation erodes the purchasing power of your savings over time. To get a more realistic picture, you can subtract the expected inflation rate (typically around 2–3% in the UK) from your expected return. For example, if you expect 7% returns and 2.5% inflation, enter 4.5% to see your growth in today's money.