What this calculator works out
This calculator projects a single lump sum forward at a fixed rate, compounding a chosen number of times a year. It returns the final value and the growth on top of what you started with.
It assumes no further contributions and no withdrawals. If you are saving monthly, the Regular Savings Calculator is the right tool. The rate is a projection you supply, not a promise — the section on assumptions below explains what that means in practice.
Enter your details
Before you rely on the result
- Decide whether your rate is nominal or already compounded. Savings accounts advertise AER, which has compounding built in; if you enter an AER, set compounds per year to 1 to avoid counting it twice.
- Use a realistic rate. Long-run equity returns before inflation have historically been in the region of 5–8% a year, with substantial variation; cash typically tracks somewhere near Bank Rate.
- Decide whether you want the result in today's money or future money. The figure shown is future money, which will buy less than the same amount today.
- Remember that charges reduce the rate. A fund charging 0.75% a year turns a 7% return into 6.25% before anything else is deducted.
A nominal rate of 5% compounded monthly is not the same as 5% a year. It produces an effective annual rate of about 5.12%, because each month's interest earns interest for the rest of the year. AER already expresses this as a single annual figure, which is precisely why it exists — it makes accounts comparable.
How this calculator works
The calculator applies the standard compound interest formula:
Future value = P × (1 + r ÷ m)m × tWhere P is the starting amount, r is the annual rate as a decimal, m is the number of compounding periods each year and t is the number of years. Growth is simply the future value minus the starting amount.
Compounding frequency has a smaller effect than most people expect. At 5% over ten years, moving from annual to monthly compounding on £5,000 adds around £80. The rate and the number of years do the heavy lifting.
Worked example: £5,000 for ten years
Using the default figures — £5,000 at 5% a year, compounded monthly for ten years:
- Monthly rate: 5% ÷ 12 = 0.4167%
- Periods: 12 × 10 = 120
- Future value: £5,000 × 1.0041667120 = £8,235.05
- Growth: £3,235.05
Two things are worth noticing. First, the growth is not 5% × 10 = 50%; it is about 65%, and the difference is compounding. Second, if inflation ran at 3% over the same decade, £8,235 would buy roughly what £6,127 buys today — still a real gain, but a much smaller one than the headline suggests.
Common mistakes
- Entering an AER and then also setting monthly compounding. This counts the compounding twice and overstates the result.
- Using an optimistic rate over a long period. Small differences compound: over 30 years, 7% produces almost double what 5% produces.
- Forgetting charges. Platform and fund fees come out of the return every year, not once.
- Reading the result as guaranteed. A fixed rate is realistic for a fixed-term savings bond and unrealistic for anything invested, where the average conceals years of losses.
- Ignoring tax. Interest above the Personal Savings Allowance, and gains outside an ISA or pension, may be taxable.
Frequently asked questions
What rate should I use?
It depends entirely on where the money is. For a fixed-rate savings bond, use the advertised rate — it is contractual. For an instant-access account, use the current rate but remember it can change at any time. For investments, any figure is an assumption; running the calculation two or three times across a range such as 3%, 5% and 7% is far more informative than picking one number and treating it as fact.
Does more frequent compounding make a meaningful difference?
Rarely. Going from annual to monthly compounding at 5% raises the effective rate from 5% to about 5.12%. Going from monthly to daily adds a further 0.01 percentage points or so. It is worth understanding, but it is not worth choosing an account for.
Why does my savings account pay less than this suggests?
Usually one of three reasons: the advertised rate included a bonus that has expired, the rate was variable and has been cut, or tax has been deducted or is due on interest above your Personal Savings Allowance. Introductory bonus rates on instant-access accounts are the most common explanation.
How do I see the result in today's money?
Run the Inflation Impact Calculator on the future value using your assumed inflation rate. Alternatively, enter a real rate here — your assumed return minus assumed inflation — and the result will already be expressed in today's purchasing power.
Is this suitable for a mortgage or loan?
No. Debt repayment involves regular payments reducing the balance, which needs an amortisation calculation rather than this one. Use the Loan Comparison Calculator or the Credit Card Repayment Calculator instead.
Related tools
References
- Bank of England — Bank Rate and the monetary policy background to savings and borrowing rates
- MoneyHelper — guidance on savings accounts, AER and how interest is taxed
- Financial Conduct Authority — rules on how savings and investment returns must be presented
Sources are checked at publication and can change — how I choose and check references.