Use the calculator to see what your savings will grow to, or switch it to work out how long it will take to reach a target. Enter the rate as an AER, the figure savings accounts quote so they can be compared.
The starting rate is the Bank of England’s average 1-year fixed rate bond rate for August 2026 (4.04%). Results are before tax and don’t allow for inflation or for a variable rate changing.
How compound interest works
With compound interest, interest is added to your balance and then earns interest itself. £10,000 at 5%, with the interest added once a year:
| Year | Interest | Balance at the end of the year |
|---|---|---|
| 1 | £500.00 | £10,500.00 |
| 2 | £525.00 | £11,025.00 |
| 3 | £551.25 | £11,576.25 |
| After 10 years the balance is £16,288.95. Simple interest (paid out rather than added) would give you £500 a year, or £15,000 after ten years in total. Compounding added £1,288.95 more. |
The formula for a lump sum is balance = amount × (1 + rate)years, with the rate as a decimal (5% = 0.05) and the rate an AER. With monthly deposits, each deposit compounds for the months left, which is what the calculator adds up.
Why the AER is the rate to use
Banks pay interest monthly, quarterly or yearly. The AER (annual equivalent rate) shows what the rate would be if interest were paid and compounded once a year, so it already includes the effect of more frequent payments. That’s why the calculator asks for the AER, and why you should compare accounts on their AER: see what AER means.
Getting to a savings goal
In goal mode the calculator adds a month at a time until your balance reaches the target. Two things speed it up far more than a slightly better rate:
- A bigger monthly deposit. Over a few years, most of a savings pot is the money you pay in, not the interest.
- Starting sooner. Interest compounds for longer, and each month’s deposit has more time to earn.
A higher rate still helps, and it matters more the longer you save. If the goal is a house deposit, a Lifetime ISA adds a government bonus that no savings rate will match.
Related guides
- Savings accounts guide: the account types, average rates, tax and protection in one place
- How to find the best savings account: the benchmark and checks for any account
- Savings interest tax calculator: the tax on a year’s interest
- Regular savers: what monthly saving earns over a year