Guide
Compound Interest Examples
Five quick scenarios to see how rate and time affect compounding. Copy the inputs into the calculator to explore your own numbers.
Published: March 11, 2025 · Updated: December 21, 2025 · By FinToolSuite Editorial
Try your own inputs
Use the calculator to adjust rates, timelines, and contributions.
Open the calculatorHow to read these examples
Each example lists the starting amount (P), annual rate (r), compounding frequency, time (t), and any monthly contribution. Outputs show the ending balance, total contributions (if used), and interest earned. You can copy the inputs into the calculator for a full timeline.
Disclaimer
Educational purposes only; not financial advice. Examples are illustrative; real returns vary and investments can go down as well as up. Fees, taxes, inflation, and account rules vary by provider and country.
Example A: Lump sum, 10 years
£1,000 at 5% yearly, monthly compounding, 10 years, no contributions.
- Starting amount: £1,000
- Rate (r): 5% annually
- Compounding: Monthly
- Time (t): 10 years
- Monthly contribution: £0
Ending balance: ~£1,648 · Interest earned: ~£648
Takeaway: Most growth shows up in later years.
Try it in the calculatorExample B: Longer time horizon
£1,000 at 5% yearly, monthly compounding, 25 years, no contributions.
- Starting amount: £1,000
- Rate (r): 5% annually
- Compounding: Monthly
- Time (t): 25 years
- Monthly contribution: £0
Ending balance: ~£3,386 · Interest earned: ~£2,386
Takeaway: More years give compounding more room to work.
Try it in the calculatorExample C: Lower rate
£1,000 at 3% yearly, monthly compounding, 10 years, no contributions.
- Starting amount: £1,000
- Rate (r): 3% annually
- Compounding: Monthly
- Time (t): 10 years
- Monthly contribution: £0
Ending balance: ~£1,344 · Interest earned: ~£344
Takeaway: Lower rates slow growth; time still helps.
Try it in the calculatorExample D: Higher rate
£1,000 at 7% yearly, monthly compounding, 10 years, no contributions.
- Starting amount: £1,000
- Rate (r): 7% annually
- Compounding: Monthly
- Time (t): 10 years
- Monthly contribution: £0
Ending balance: ~£2,008 · Interest earned: ~£1,008
Takeaway: Higher rates accelerate the curve, especially later.
Try it in the calculatorExample E: Adding contributions
£1,000 start + £50/month, 5% yearly, monthly compounding, 10 years.
- Starting amount: £1,000
- Rate (r): 5% annually
- Compounding: Monthly
- Time (t): 10 years
- Monthly contribution: £50
Ending balance: ~£8,776 · Total contributions: £7,000 · Interest earned: ~£1,776
Takeaway: Contributions add principal and give more for compounding to act on.
Try it in the calculatorWhat changes results the most?
- Time horizon: longer timelines typically drive larger gaps.
- Rate: higher rates steepen the curve.
- Compounding frequency: monthly vs yearly nudges the result; time and rate matter more.
- Contributions: steady deposits add principal for compounding to work on.
Common mistakes
- Entering 5 instead of 0.05 for a 5% rate.
- Mixing APR/APY without adjusting assumptions.
- Picking the wrong compounding option for the rate you’re using.
More pitfalls: compound interest common mistakes.
FAQs
Are these examples realistic?
They’re simplified and illustrative. Real returns vary by product, fees, and taxes.
Why does the balance grow faster later?
Compounding applies to a growing balance, so later periods can add more than early ones.
Does daily compounding matter?
It nudges the total up slightly versus monthly. Time and rate make a bigger difference.
How do I add monthly contributions?
Add a monthly amount in the calculator; it will combine deposits with compounding.
What if I withdraw money?
Withdrawals reduce the balance and future compounding. Model them to see the impact.
Why might real-world results differ?
Fees, taxes, inflation, timing, and market changes can shift outcomes versus a simple illustration.
Run your own scenarios
Try low, base, and higher-rate runs in the calculator to see how the range shifts.
Open the calculator