Free Compound Interest Calculator
Use our advanced compound interest calculator to see how your investments can grow over time. Adjust the parameters to find the perfect investment strategy for your goals.
Enter Your Details
Provide your age, income, and current super balance.
Add Contributions
Include any voluntary contributions you plan to make.
See Your Future
Instantly get a detailed projection and visual breakdown.
What is Compound Interest?
Compound interest is the phenomenon where your investment earns returns, and those returns themselves earn returns, creating a snowball effect that accelerates wealth accumulation over time. Unlike simple interest which only earns on your principal, compound interest creates exponential growth.
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Albert Einstein allegedly called compound interest “the eighth wonder of the world,” noting that “he who understands it, earns it; he who doesn’t, pays it.” This fundamental principle is the difference between financial struggle and financial freedom for most Australians.
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The magic happens because each period’s interest becomes part of the principal for the next period. Over decades, this effect becomes dramatic—a $10,000 investment at 8% grows to $46,600 in 20 years and $100,600 in 30 years. The longer you wait, the more powerful compound interest becomes.
Formula
A = P(1 + r/n)^(nt)
Where A = final amount, P = principal, r = annual interest rate, n = compounding frequency, t = time in years
Exponential Growth
Your money grows faster over time as interest earns interest, creating a powerful snowball effect that accelerates wealth accumulation.
Regular Contributions
Small, consistent monthly contributions can dramatically boost your final investment value through the power of dollar-cost averaging.
Time Advantage
Starting early gives you the greatest advantage in building wealth. Time is your most valuable asset in the compound interest equation.
Master the Art of Investing
Learn the fundamental principles of compound interest and how to apply them to build lasting wealth over time.
The Power of Compounding
Albert Einstein reportedly called compound interest 'the eighth wonder of the world.' Your money earns money, which then earns more money.
Time is Your Best Friend
The earlier you start, the less you need to save monthly to reach your goals. A 25-year-old needs to save less than half of what a 35-year-old needs for the same retirement goal.
Dollar-Cost Averaging
Regular contributions help smooth out market volatility. You buy more shares when prices are low and fewer when prices are high.
Set Clear Goals
Having specific financial goals helps you stay motivated and make informed decisions about how much to save and invest.
UK Investment Options & Historical Returns
Different investment types offer varying returns and compounding frequencies. Understanding these options helps you choose the right strategy for your goals and risk tolerance.
High-Interest Savings Accounts
Very Low RiskFSCS-protected savings with competitive interest rates. Government guaranteed up to £85,000 per person per bank. Easy access or notice accounts available.
✓ Advantages
- FSCS protected (£85K)
- Easy access options
- No market risk
- Personal Savings Allowance
✗ Considerations
- Lower returns vs shares
- Rates can change
- Tax on interest (above PSA)
- Inflation risk
Fixed-Rate Savings Bonds
Very Low RiskFixed-rate savings locked in for set terms (1-5 years). FSCS protected. Guaranteed rate for the term regardless of Bank of England changes.
✓ Advantages
- FSCS protected
- Locked-in rate
- Predictable returns
- Various term options
✗ Considerations
- Funds locked away
- No early access
- Miss rate rises
- Tax on interest
UK Gilts & Corporate Bonds
Low to Medium RiskUK Government gilts, Premium Bonds, and corporate bonds. NS&I products are 100% government backed. Good for income-focused investors.
✓ Advantages
- Regular income stream
- Lower volatility
- NS&I 100% backed
- Portfolio diversification
✗ Considerations
- Interest rate risk
- Credit/default risk
- Lower growth potential
- Complex for beginners
Cash ISA
Low to Medium RiskTax-free Individual Savings Account for cash savings. £20,000 annual ISA allowance (2024/25). All interest is 100% tax-free, no income tax or CGT.
✓ Advantages
- 100% tax-free interest
- FSCS protected
- Flexible withdrawals
- Transfer between providers
✗ Considerations
- £20K annual limit
- Lower rates than standard
- Use it or lose allowance
- Rates may be lower
Gold & Precious Metals
Medium RiskPhysical gold from Royal Mint, Gold ETFs on LSE, or gold funds. UK gold sovereigns are CGT-free. Traditional inflation hedge and safe-haven asset.
✓ Advantages
- Inflation hedge
- Safe-haven asset
- Sovereigns CGT-free
- Portfolio diversification
✗ Considerations
- No income/dividends
- Storage costs (physical)
- Price volatility
- Currency risk (USD priced)
Workplace Pension (Default)
Medium RiskAuto-enrolled workplace pension with balanced default fund. Minimum 8% total contribution (5% you, 3% employer). Tax relief at your marginal rate.
✓ Advantages
- Free employer money
- Tax relief on contributions
- 25% tax-free lump sum
- Professional management
✗ Considerations
- Locked until 55 (rising to 57)
- Limited fund choice
- 75% taxed as income
- Annual allowance (£60K)
Stocks & Shares ISA (ETFs)
Medium-High RiskTax-free ISA wrapper for ETFs tracking FTSE 100, S&P 500, or global indices. £20,000 annual allowance. No CGT or dividend tax on gains.
✓ Advantages
- Tax-free gains & dividends
- Very low fees (0.05-0.5%)
- Instant diversification
- Flexible withdrawals
✗ Considerations
- Market risk exposure
- £20K annual limit
- Platform fees apply
- Can lose value
UK Property (Direct)
Medium-High RiskUK residential or commercial property. Combines rental income (4-6% yield) with capital growth. Buy-to-let now taxed on gross rent (Section 24).
✓ Advantages
- Tangible asset
- Rental income stream
- Leverage available
- Main residence CGT-free
✗ Considerations
- Stamp duty (higher rate)
- Section 24 tax changes
- Illiquid investment
- Management costs
UK REITs
Medium-High RiskLSE-listed REITs like Land Securities, British Land, Segro. Access commercial property without buying directly. Hold in ISA for tax-free income.
✓ Advantages
- Liquid (trade on LSE)
- Low entry cost
- Hold in ISA/SIPP
- Regular distributions
✗ Considerations
- Share market volatility
- Interest rate sensitive
- REIT dividends as income
- Management fees
SIPP (Growth)
Medium-High RiskSelf-Invested Personal Pension with growth-focused equity investments. Full control over investments. Tax relief up to 45% (additional rate taxpayers).
✓ Advantages
- Tax relief (20-45%)
- Full investment control
- 25% tax-free at 55
- Inheritance tax benefits
✗ Considerations
- Locked until 55 (rising)
- Higher short-term volatility
- £60K annual allowance
- Platform fees apply
Stock Market (FTSE)
High RiskDirect share investment on LSE with potential for capital growth and dividends. Hold in ISA for tax-free gains. £6,000 CGT allowance (2024/25).
✓ Advantages
- Growth potential
- Dividend income
- Hold in ISA/SIPP
- Ownership in companies
✗ Considerations
- High volatility
- Can lose capital
- Requires research
- CGT on gains (outside ISA)
Cryptocurrency
Very High RiskDigital assets like Bitcoin and Ethereum via FCA-registered exchanges like Coinbase or Kraken. HMRC treats as CGT asset – £6,000 allowance applies.
✓ Advantages
- High growth potential
- 24/7 global market
- Portfolio diversification
- CGT allowance applies
✗ Considerations
- Extreme volatility
- Can lose 50%+ quickly
- Not in ISA/SIPP
- Security/scam risks
See the Impact of Starting Early
Compare different investment scenarios and see how starting age and contribution amounts affect your final results.
The College Graduate
Starting early with modest contributions
$1.2M
| Starting Age | 22 years old |
| Initial Amount | $1,000 |
| Monthly Contribution | $200 |
| Investment Period | 43 years |
Assumes 7% annual return, compounded monthly
The Career Switcher
Mid-career financial planning
$1.1M
| Starting Age | 30 years old |
| Initial Amount | $5,000 |
| Monthly Contribution | $400 |
| Investment Period | 35 years |
Assumes 7% annual return, compounded monthly
The Late Starter
Accelerated savings for retirement
$950K
| Starting Age | 40 years old |
| Initial Amount | $15,000 |
| Monthly Contribution | $800 |
| Investment Period | 25 years |
Assumes 7% annual return, compounded monthly
Proven Strategies for Long-term Success
Follow these time-tested strategies to maximize your investment returns and build substantial wealth over time.
Start Early
The power of time in compound interest cannot be overstated. Starting your investment journey early gives you the greatest advantage.
- Begin investing in your 20s for maximum compound growth
- Even $50/month can grow to substantial amounts over decades
- Time is more valuable than large initial investments
Consistent Contributions
Regular monthly contributions can dramatically increase your final investment value through dollar-cost averaging.
- Set up automatic monthly transfers
- Increase contributions with salary raises
- Stay consistent even during market downturns
Optimize Interest Rates
Small differences in interest rates
- Research and compare investment options
- Consider diversified portfolios for better long-term returns
- Rebalance periodically to maintain target allocation
Avoid Early Withdrawals
Let your investments compound undisturbed. Early withdrawals eliminate future compound growth potential.
- Build an emergency fund separately
- Understand withdrawal penalties and tax implications
- Stay focused on long-term goals
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Frequently Asked Questions
About this calculator
Always consult with a qualified financial advisor before making significant investment decisions. Past performance doesn’t guarantee future results.