Compound interest calculator and formula

The compound interest formula

The formula is A = P × (1 + r ÷ n)^{n × t}, where P is the amount you start with, r is the yearly interest rate as a decimal, n is how many times a year interest is added and t is the number of years. A is the final amount, and the interest earned is A − P.

Worked example: P = £10,000, r = 0.05, n = 12, t = 10. A = £10,000 × (1 + 0.05 ÷ 12)¹²⁰ = £16,470.09. The interest earned is £6,470.09.

£10,000 at different rates and times (compounded monthly)

Small differences in the rate or the number of years change the result a lot, because the growth compounds.

Does compounding more often matter?

Yes, but only a little. At 5% for 10 years, £10,000 becomes £16,289 compounded yearly and £16,487 compounded daily. The rate and the time matter far more than the frequency.

Compound versus simple interest

With simple interest, only the original £10,000 earns interest: £500 a year, so £15,000 after 10 years. Compound interest gives £16,470, which is £1,470 more. The gap widens every year.

The rule of 72

To estimate how long money takes to double, divide 72 by the yearly rate. At 6% it takes about 12 years, at 8% about 9 years and at 3% about 24 years.

Adding money every month

Regular saving makes compounding more powerful. £10,000 at 5% with £100 added each month grows to £31,725 after 10 years, using £22,000 of your own money.