# Compound Interest Calculator

When you put money into a bank account which offers you an interest rate, the money *compounds*. This means that, rather than just going up by the same amount every year, your savings get much larger over time than you might expect.

This is because, as well as earning interest on the initial amount of money you put in, you also start to earn interest on the interest payments you received from previous years. Read More Below...

## About This Tool

When you put savings into the bank, you are usually offered an interest rate that the bank will pay you to keep your money.

So, if you put £100 in at a rate of 5%, you would get £5 added to your account. However the following year, you not only get another £5 (for the original £100) - you also earn interest on the £5 you earned last year. So, for the second year you'd actually earn £5.25.

In the first few years, this extra "interest on the interest" payment doesn't add up to much, but over many years it can really add up.

You can use the calculator above to see how much money it can grow to over time. In this example, by year 40, you'd be earning around £35.

This is the power of compound growth. Unfortunately, it can also apply to debts. Over time, what starts off as a small manageable debt, can balloon into huge sum owed.