See how your savings and investments grow over time with the power of compound interest.
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (calculated only on the principal), compound interest allows your money to grow exponentially over time.
A = P(1 + r/n)^(nt)
A quick way to estimate how long it takes to double your money: divide 72 by the interest rate. For example, at 6% interest, your money doubles in approximately 72 ÷ 6 = 12 years.
The effect is slow at first and then speeds up. The same monthly saving, left long enough, ends up earning more in interest than you ever paid in.
| Scenario | Paid in | Interest | Final balance |
|---|---|---|---|
| £10,000 plus £200 a month at 5% for 10 years | £34,000 | £13,526.55 | £47,526.55 |
| £300 a month at 5% for 30 years | £108,000 | £141,677.59 | £249,677.59 |
| £10,000 left alone at 4% for 20 years | £10,000 | £12,225.82 | £22,225.82 |
All three assume monthly compounding with contributions at the end of each month. In the 30-year example, more than half the final pot is interest. Starting ten years later with the same monthly amount would leave you with well under half of it, which is the real argument for starting early.
Compound interest is interest earned on your interest as well as on the money you put in. Each month or year, the interest is added to the balance, so the next payment of interest is worked out on a slightly bigger sum.
Most UK savings accounts calculate interest daily and pay it monthly or once a year. The more often interest is added, the slightly higher the effective annual rate (AER), which is why banks quote AER to make accounts comparable.
Interest counts as income, but most people pay no tax on it thanks to the Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate) and, for low earners, the £5,000 starting rate for savings. Interest inside an ISA is always tax-free.
A quick way to estimate how long money takes to double: divide 72 by the annual interest rate. At 4% it takes about 18 years, at 6% about 12 years. It is an approximation, but a surprisingly close one.
Source: GOV.UK: Tax on savings interest. General information, not financial advice.
Bank of England base rate: 3.75% (since 18 December 2025)
Savings and cash ISAs: the best easy-access and fixed rates usually sit close to base rate. Check a comparison site for today's rates.
Long-term investing: shares have beaten cash over long periods, but not every year. A cautious planning assumption is 4% to 6% a year before inflation.
Try a few rates to see the range of outcomes.