⚡ The short version
£10,000 at 7% for 20 years grows to £38,696.84 untouched. Add £500 a month and it becomes £300,850.72 — you paid in £130,000 and compounding did the other £170,851.
The calculator
How to use it
- Starting amount and rate — what you have now and the annual return you want to model. Try 4% for cautious, 7% for the long-run stock-market average often quoted.
- Monthly top-up — the number that matters most. Small regular additions beat clever rate-picking over long horizons.
- Years — run 10, 20 and 30 side by side. The gap between them is the whole argument for starting now.
Worked example
Start with £10,000 at 7%, compounded yearly, for 20 years, no top-ups. The formula is A = P(1 + r)^t: £10,000 × 1.07^20 = £10,000 × 3.8697 = £38,696.84. Nearly quadrupled, while you did nothing.
Now add £500 every month. The lump sum still grows to £38,696.84 — and the 240 monthly payments, each compounding for whatever is left of the 20 years, add about £262,154 on top, for £300,850.72 total. You contributed £130,000. The market calendar contributed the rest.
The shortcut the example hides: the rule of 72. Divide 72 by the rate for the doubling time — at 7%, money doubles every 10.3 years. Two doublings in 20 years is roughly ×4, which is exactly what the formula says.
What the number leaves out
- Inflation. £300,000 in 20 years buys less than £300,000 today. At 2.5% inflation it buys what about £183,000 buys now. Real return is what matters.
- Tax wrappers. The same money inside an ISA (£20,000 a year allowance) keeps all of it; outside one, interest and gains may be taxed.
- Volatility and fees. Real returns lurch; a 1% annual fee quietly eats roughly a quarter of a 30-year return. Model 7% if you expect 8% and pay 1%.
🛠️ Related money tools
📖 Long-form companion: Why compound growth is magic.
❓ Frequently asked questions
What is the compound interest formula?
A = P(1 + r/n)^(nt): principal × (1 + rate ÷ compounds-per-year) ^ (compounds × years). £10,000 at 7% compounded yearly for 20 years is £10,000 × 1.07^20 = £38,696.84.
What is the rule of 72?
Divide 72 by the annual rate to estimate doubling time. At 7%, money doubles in about 10.3 years. It breaks down above ~15% and ignores contributions, but it is right where it matters.
How much does £500 a month grow to?
£500 a month for 20 years at 7% — on top of a £10,000 start — grows to about £300,851. You paid in £130,000; compounding did the other £170,851. Time does more work than the monthly amount.
Is this financial advice?
No. This is arithmetic, not advice. It assumes a smooth fixed return every year, which no real investment delivers, and it ignores inflation, tax and fees. For decisions that matter, speak to a qualified financial adviser.