Savings and compound interest calculator

How compound interest works

Compound interest is interest earned on your earlier interest as well as on the money you put in. Each time interest is added, the next lot is worked out on a bigger balance, so growth speeds up the longer you leave it.

Example: start with 5,000, add 200 at the end of every month, and earn 4% a year added monthly. After 10 years you have 36,904.12. You paid in 29,000, so 7,904.12 is interest.

Does it matter how often interest is added?

A little. 10,000 at 5% for 20 years grows to 26,532.98 with interest added once a year, and to 27,126.40 if it is added monthly. When comparing accounts, look at the AER (UK), APY (US) or effective annual rate, which already account for how often interest is paid, and enter that with “yearly”.

A quick way to estimate: the rule of 72

Divide 72 by the yearly rate to get roughly how many years it takes for money to double. At 6% that is 72 ÷ 6 = 12 years; the exact answer is 11.9 years. It works well for rates between about 2% and 10%.

What to enter for investments

Shares and funds don’t pay a fixed rate. You can still use an assumed average return, but real returns go up and down from year to year and can be negative, and fund charges reduce what you keep. Many people model a cautious, a middle and an optimistic rate to see the range.

Tax-free savings accounts by country

Interest is often taxable, which this calculator doesn’t deduct. Accounts that shelter savings from tax include ISAs in the UK, TFSAs and RRSPs in Canada, 401(k)s and IRAs in the US, superannuation in Australia and KiwiSaver in New Zealand, each with its own limits and rules. The UAE and Saudi Arabia do not tax personal interest income.