Use our compound interest returns calculator to see how much your money will grow over time.
How to use the Good Money Guide compound returns calculator
The compound interest calculator on Good Money Guide allows you to estimate the future value of an investment with reinvested interest. Here’s step-by-step how to use it:
| Field / Option | What it means | Tips / things to watch out for |
| Starting Amount | The principal (initial sum) you are investing | Enter the amount you plan to invest now (e.g. £1,000) |
| Duration (Years) | The time period over which compounding happens | Use whole or fractional years as appropriate (e.g. 5, or 10) |
| Interest Rate | The annual interest (or return) rate, in % | Input a realistic expected return (after fees) |
| How Often is Interest Added? | Frequency of compounding (e.g. annually, monthly) | More frequent compounding leads to more gain (all else equal) |
| Total Amount in Future | The projected value at the end (principal + earned interest) | This is what you’ll “see” after compounding |
| Total Interest | The portion that came from growth (future value minus starting amount) | Useful to see how much of the final is “growth” vs “your money” |
Using the compound interest return calculator tool:
- Go to the page: “Compound Interest Returns Calculator UK”
- Fill in your Starting Amount, Duration (years), Interest Rate.
- Choose compounding frequency (Annually, Monthly).
- Submit → the calculator returns Total Amount in Future and Total Interest.
Optionally, you can adjust the inputs (e.g. increase time, or rate) to see how outcomes change.
Things to keep in mind:
- The calculator assumes reinvestment of all interest (i.e. interest itself also earns interest).
- It doesn’t necessarily factor in taxes, fees, inflation, or risk — so the real result might differ.
- The “interest rate” you use should reflect net return after costs (or at least a realistic return).
- If your investment returns are volatile (e.g. stocks), compounding assumptions are more approximate.
Why are compounding returns so important?
Compounding (sometimes called “interest on interest”) is one of the most powerful mechanisms in long-term investing. Here’s why it matters, especially in the UK:
1. Exponential growth over time
When returns are reinvested, your returns generate their own returns. Over time, the growth accelerates — the longer you stay invested, the more compounding “kicks in.”
For example:
If you invest £1,000 at 5% per year, compounded annually:
- After 1 year → £1,050
- After 2 years → £1,050 × 1.05 = £1,102.50
- After 10 years → £1,628.89
- After 20 years → £2,653.30
- After 30 years → £4,321.94
You see that much of the gain in later years comes from compounding itself.
2. Time is your greatest ally
Because compounding accelerates over time, starting earlier gives you a big advantage. Even modest additional time can make a large difference.
In the UK, where inflation, fees, and taxes eat into returns, maximizing the time your money compounds is crucial.
3. Beating inflation (and preserving purchasing power)
In the UK, inflation erodes the real value of money. If your returns only match inflation (or are lower after costs), compounding won’t give much real gain. But if your investment returns exceed inflation, compounding helps build real wealth over decades.
4. Mitigating “dead money”
Money left in low or zero interest accounts doesn’t get to compound much (or at all). By contrast, money invested in growth assets (that yield positive returns) benefits from compounding. Over long periods in the UK, that difference can be material.
5. Effect of fees, taxes, and costs
Because compounding multiplies gains, small drags (fees, poor performance, taxes) compound negatively too. Over many years, high fees or taxes can erode much of what compounding would otherwise give you. That’s why it’s so important to choose low-cost investments (funds, ETFs) and tax-efficient wrappers (e.g. ISAs, pensions) in the UK.
6. The “rule of 72” intuition
A useful rule of thumb: divide 72 by your annual return to estimate how many years it takes to double your money. For example, at 6% annual returns, 72 ÷ 6 = 12 years to double (approximately). Compounding makes this kind of doubling intuitive.
A simple worked UK example for calculating compounding interest and investment returns
Let’s say you live in the UK and invest:
- Start = £5,000
- Duration = 25 years
- Expected net return = 5% p.a. compounded annually
- Assume no extra contributions (for simplicity)
Using the compound interest formula (or the calculator):
Future Value = 5,000 × (1.05)¹²⁵ ≈ £5,000 × 3.386 = £16,930
So your £5,000 becomes ~£16,930 over 25 years. Of that, £11,930 is growth (interest on interest).
If instead your returns were only 3%, you’d get:
5,000 × (1.03)²⁵ ≈ £10,790 — much less.
That gap comes from compounding working more strongly at higher growth rates.
Now factor in fees, taxes, etc., and the net might be lower — but the core idea is the same: compounding amplifies the difference.