The snowball effect: what could your investments be worth?
Compounding can make time extraordinarily valuable—but the famous examples often hide the assumption doing most of the work. Here is what really determines the result.
Grow · Calculator 09
When could compounding start doing more of the work?
Combine an initial investment and monthly contributions, then see how much of the result comes from money paid in and how much comes from compound growth.
1 Enter your figures2 Review assumptions3 Explore the result
Your figures
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Projected value in today’s money
£95,526£156,530 in future pounds after 20 years.Money contributed£92,471Initial amount plus rising monthly contributions
Compound growth£64,06041% of the final balance
Future pounds£156,530£61,004 inflation effect
Chart values
Wealth composition
What is the final balance made of?
Year 20
- Contributed
- £56,432
- Growth
- £39,094
- Total
- £95,526
When annual compounding does more work than new contributions
Year 16In that year, modelled growth is £5,128, compared with £4,845 contributed. This is an illustration based on a smooth return.Contributions still do most of the work.
After 20 years, £92,471 of contributions account for 59% of the projected balance. A longer horizon or a different return assumption would change the split.
Annual values
Future pounds, with contributions added at the end of each month.
| Year | Balance | Paid in | Growth | Annual growth |
|---|---|---|---|---|
| 1 | £8,932 | £8,600 | £332 | £332 |
| 2 | £13,134 | £12,272 | £862 | £530 |
| 3 | £17,621 | £16,017 | £1,604 | £742 |
| 4 | £22,409 | £19,838 | £2,571 | £968 |
| 5 | £27,515 | £23,735 | £3,780 | £1,209 |
| 6 | £32,956 | £27,709 | £5,246 | £1,466 |
| 7 | £38,750 | £31,763 | £6,986 | £1,740 |
| 8 | £44,916 | £35,899 | £9,018 | £2,031 |
| 9 | £51,476 | £40,117 | £11,359 | £2,342 |
| 10 | £58,450 | £44,419 | £14,031 | £2,672 |
| 11 | £65,860 | £48,807 | £17,053 | £3,022 |
| 12 | £73,731 | £53,284 | £20,448 | £3,395 |
| 13 | £82,087 | £57,849 | £24,238 | £3,790 |
| 14 | £90,954 | £62,506 | £28,448 | £4,210 |
| 15 | £100,360 | £67,256 | £33,104 | £4,656 |
| 16 | £110,333 | £72,101 | £38,232 | £5,128 |
| 17 | £120,904 | £77,043 | £43,861 | £5,629 |
| 18 | £132,105 | £82,084 | £50,020 | £6,160 |
| 19 | £143,968 | £87,226 | £56,742 | £6,722 |
| 20 | £156,530 | £92,471 | £64,060 | £7,318 |
Assumptions used
- The entered return is an effective annual rate applied evenly each month.
- Monthly contributions are made at month end and increase once a year by the selected rate.
- Returns are reinvested. Fees, tax, volatility and withdrawals are not included.
- Today’s-money values use a constant 2.5% annual inflation assumption.
A smooth return is useful for understanding compounding, not for predicting an investment. Real returns vary and can be negative.
Common questions
Compound interest calculator FAQs
How is compound interest calculated?
The calculator applies the selected effective annual return proportionally each month, reinvests each month’s growth and then adds the monthly contribution at month end. Future growth is therefore earned on the original money, earlier contributions and previous growth.
What return should I enter?
Use a return assumption you can explain and stress-test, not the best historic number you can find. The calculator uses a smooth constant rate for illustration; a real investment will rise and fall, may underperform the assumption and may lose money.
What is the difference between nominal and real wealth?
Nominal wealth is the amount of future pounds shown by the calculation. Real wealth adjusts that amount for the selected inflation rate and expresses its estimated purchasing power in today’s pounds.
When does compounding overtake contributions?
The highlighted annual crossover is the first year in which modelled growth during that year is greater than the new contributions made during that year. The calculator separately explains whether cumulative growth ever becomes larger than everything paid in.
Does this include investment fees or tax?
No. This calculator isolates compound growth. Use the Investment Growth calculator when you need scenarios, percentage and fixed fees, contribution charges, tax-basis notes or a market-shock illustration.