Investing
What is pound cost averaging?
Pound cost averaging and negative pound cost averaging are strategies to attempt to reduce risk, but they do come with some risks of their own.
Free tool
Compound Interest Calculator
See how a starting pot and regular monthly saving could grow over time, and how much of the final figure is pure compound growth rather than money you paid in.
Projected value£84,919
£35,919 growthYou’d pay in £49,000 and earn about £35,919 on top, roughly 73% growth on what you put in. The longer you leave it, the more the compounding does the heavy lifting.
Assumes a steady average return compounded monthly, real investments rise and fall. Not advice. See pound cost averaging and investing for beginners.
The eighth wonder of the world
Compound interest is often called exactly that, because your money earns growth, and then that growth earns growth of its own. The longer you leave it, the more the curve bends upwards, so the final total is driven as much by time as by how much you put in.
Two habits that make the biggest difference
- Start early. Even small amounts have decades to compound. See pound cost averaging for the simplest way to keep it going.
- Keep contributing. Regular monthly saving quietly does the heavy lifting, as the calculator shows when you raise the monthly figure.
New to investing? Start with our plain-English guide to investing for beginners in the UK.
Frequently asked questions
What is compound interest?
Compound interest is interest earned on both your original money and on the interest it has already earned. Over time that snowballs, each year's growth is calculated on a bigger and bigger balance, which is why starting early matters so much more than starting big.
How is compound interest calculated?
This calculator compounds monthly. It grows your starting amount and each monthly contribution at the annual rate divided across twelve months, then adds it all up over the number of years you choose. Real-world returns vary year to year, so treat the result as a smooth long-term average rather than a promise.
What growth rate should I use?
For cash savings, use the interest rate on your account. For long-term stock market investing, many people model a cautious 4 to 6 percent a year after inflation, though returns are never guaranteed and can be negative in any given year. Try a few rates to see the range of outcomes.
Does starting early really make that much difference?
Enormously. Because growth compounds, money invested in your twenties has decades to snowball, so an early saver who contributes less can end up ahead of a later saver who contributes more. Time in the market is the single biggest lever the calculator reveals.
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