Compound Interest Calculator

Simple interest is earned only on your original amount. Compound interest is earned on your original amount plus all the interest already added — so each period's interest is bigger than the last. Over a few years the difference is modest; over decades it's enormous. This is why compounding is often called the eighth wonder of the world, and why starting early beats saving more later.

Three things drive the result. The rate of return: even 1% extra a year compounds into a large gap over decades. Time: the single most powerful lever, because the steepest growth happens at the end. And compounding frequency: interest added monthly grows slightly faster than annually, as it starts compounding sooner. Regular contributions supercharge all three by constantly adding new money to compound.

To estimate how long an investment takes to double, divide 72 by the annual return. At 6% a year, money doubles in about 12 years (72 ÷ 6); at 8%, in 9 years. It's a handy mental shortcut for grasping the power — and the cost of a lower rate or higher fees, which extend the doubling time.

Compounding powers ISAs, pensions, savings accounts and investment funds. To harness it: start as early as possible, reinvest all interest and dividends, contribute regularly, keep charges low, and leave it alone — withdrawing early breaks the compounding chain. Tax wrappers like ISAs and pensions let the growth compound without tax dragging on it each year.

• Waiting to start. The biggest growth happens in the final years, so delaying loses the most valuable compounding time.
• Not reinvesting. Spending the interest or dividends stops them compounding. Reinvest to keep the snowball rolling.
• Ignoring fees. High charges compound against you. A low-cost fund can be worth tens of thousands over time.
• Comparing to zero, not inflation. A 2% return when inflation is 3% loses real value. Aim to beat inflation.