How does compound interest work?

Compound interest is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods.

Investing

Compound Interest Calculator

Calculate how your investments grow over time using compound interest, and see the real value after inflation.

Calculator Inputs

Initial Amount (£)

Expected Annual Return (%)

Investment Horizon (Years)

Expected Inflation Rate (%)

£503.13K

£239.86K

Purchasing Power Lost

52.3%

Real Wealth Insight

Inflation-Adjusted

£503.13K

£239.86K(-52%)

Inflation Loss Intensity52.3%

Inflation at 2.5% erodes £263.27K in buying power over 30 years.

Key Strategic Takeaway

An investment of £50,000 compounding at 8% over 30 years grows to a nominal £503.13K. Adjusted for 2.5% inflation, its real purchasing power is £239.86K — eroding 52.3% of your potential wealth.

Actionable Next Steps

Step-Up SIP Calculator

Inflation is eating 52% of your returns. Try increasing your investments annually to beat it.

Target Corpus Calculator

See exactly how much you need to invest monthly to reach your actual goal after inflation.

Wealth Growth Over Time

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Return Scenario Comparisons

Conservative (-2%)

6.0% Return

£287.17K

£136.91K

Power Lost:52.3%

Expected (Base)

8.0% Return

£503.13K

£239.86K

Power Lost:52.3%

Optimistic (+2%)

10.0% Return

£872.47K

£415.94K

Power Lost:52.3%

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Methodology: Mathematical FormulasData Sources: Inflation & Tax CitationsDisclaimer: Legal Disclosures

Calculation Methodology & Formulas

The future value with compound interest is calculated as:

FV = P × (1 + r/n)^nt

Real-World Compounding Projections

Compounding $10,000 at 8% return

Investing $10,000 compounded annually at 8% for 20 years results in a nominal corpus of $46,610, which represents a real value of $28,474 under 2.5% inflation.

Frequently Asked Questions (FAQ)

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