Plot No. 8 · Money & Finance
Compound Interest Calculator
See how a lump sum grows over time when interest compounds. Set your starting amount, rate, number of years and how often interest is added to watch your balance build.
Uses the standard compound interest formula A = P(1 + r/n)^(nt). This assumes a fixed rate and no further deposits or withdrawals.
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How compound interest is calculated
Compound interest is interest earned on your interest as well as on your original deposit. This calculator uses the standard formula A equals P times one plus r over n, all raised to the power of n times t, where P is your starting amount, r is the annual rate as a decimal, n is how many times interest compounds each year and t is the number of years.
Because each compounding period adds interest to the balance that the next period then earns on, growth accelerates over time. The longer the horizon, the more the final balance is made up of interest rather than your original deposit.
How to use the compound interest calculator
- Enter your starting amount.
- Set the annual interest rate and the number of years to leave it invested.
- Choose how many times a year interest compounds, then read the future balance and the interest earned.
Worked examples
10,000 at 5 percent for 10 years, compounded monthly
Inputs: Starting amount 10,000, rate 5 percent, 10 years, 12 compounds per year.
Result: A future balance of about 16,470, of which roughly 6,470 is interest.
The same deposit compounded annually
Inputs: 10,000 at 5 percent for 10 years, 1 compound per year.
Result: A future balance of about 16,289, around 181 less than monthly compounding, showing how frequency helps a little but the rate matters far more.
Limitations and common mistakes
Edge cases and limitations
- It models a single lump sum left untouched. It does not add regular deposits, so a real savings plan with monthly contributions will end higher.
- The rate is fixed for the whole period. Variable rates and tax on the interest are not modelled.
- The future balance is rounded to whole pounds, so it may differ by a small amount from a bank statement.
Common mistakes
- Entering the rate as a decimal such as 0.05 instead of 5. The field expects the percentage figure.
- Expecting the result to include monthly saving. For a recurring contribution plan, a savings goal calculator is the right tool.
Frequently asked questions
What is the compound interest formula?
The future value is A = P(1 + r/n) raised to the power of n times t, where P is the starting amount, r is the annual rate as a decimal, n is how many times interest compounds per year, and t is the number of years.
Why does compounding frequency matter?
The more often interest is added, the more often you earn interest on interest. Monthly compounding grows a balance slightly faster than annual compounding at the same headline rate, though the difference is usually modest.
Does this account for regular deposits?
No. This calculator models a single lump sum left to grow. If you plan to add money regularly, your final balance will be higher than the figure shown here.
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