Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and accumulated interest from previous periods. Unlike simple interest (calculated only on principal), compound interest grows exponentially. Formula: A = P(1 + r/n)^(nt) where P = principal, r = annual rate, n = compounding frequency, t = years.

More frequent compounding yields higher returns. For £100,000 at 10% for 5 years: Annual compounding = £161,051, Monthly = £164,530, Daily = £164,861. The difference grows significantly with larger amounts and longer time periods.

The Rule of 72 estimates how long it takes to double your money: Years to Double = 72 / Annual Interest Rate. At 8% interest, money doubles in ~9 years. At 12%, it doubles in ~6 years. This is a quick mental math shortcut for compound interest.

Simple interest: Interest = P × r × t (linear growth). Compound interest: A = P(1+r/n)^(nt) (exponential growth). Over 20 years at 10%, £100K grows to £300K with simple interest but £673K with annual compounding — more than double!