Interest Calculator Savings Calculator UK

Compound Interest Formula:

\[ A = P \times (1 + r/n)^{n \times t} \]

Principal Amount (P):

Annual Interest Rate (r):

Compounding Periods (n):

per year

Time Period (t):

years

Future Value (A):

Total Interest Earned:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Compound Interest?

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It allows savings to grow at an accelerating rate over time, making it a powerful tool for long-term wealth accumulation.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + r/n)^{n \times t} \]

Where:

\( A \) — Future value of the investment/loan
\( P \) — Principal investment amount
\( r \) — Annual interest rate (decimal)
\( n \) — Number of times interest is compounded per year
\( t \) — Time the money is invested/borrowed for, in years

Explanation: The formula calculates how much an investment will grow when interest is earned on both the initial amount and the accumulated interest.

3. Importance of Compound Interest

Details: Compound interest is fundamental to long-term savings growth. Understanding it helps in making informed financial decisions, planning for retirement, and maximizing investment returns over time.

4. Using the Calculator

Tips: Enter the principal amount in pounds, annual interest rate as a percentage, number of compounding periods per year, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How often is interest typically compounded?
A: Common compounding frequencies include annually (1), semi-annually (2), quarterly (4), monthly (12), and daily (365).

Q3: Why does compounding frequency matter?
A: More frequent compounding results in higher returns because interest is calculated and added to the principal more often.

Q4: Is this calculator specific to UK savings?
A: While designed with UK users in mind, the compound interest formula is universal and applies to any currency.

Q5: Are there any tax considerations?
A: Yes, interest earned on savings may be subject to tax depending on your personal savings allowance and tax bracket in the UK.