See how your savings or investments grow over time with the power of compound interest. Adjust the starting amount, interest rate, time period and compounding frequency to model different scenarios.
Compound interest means you earn interest on your interest as well as your original principal. This creates exponential growth over time — the longer your money is invested, the more dramatic the effect becomes.
A = P(1 + r/n)^(nt) where: A = final amount, P = principal (starting amount), r = annual interest rate as a decimal, n = number of times interest compounds per year, t = number of years.
£10,000 invested at 7% annually for 20 years grows to approximately £38,697. The same amount invested for 30 years grows to £76,123. An extra 10 years nearly doubles your money. This is why financial advisers always stress starting to invest as early as possible.
The more frequently interest compounds, the faster your money grows. Daily compounding slightly outperforms annual compounding, though the difference is small at typical interest rates.