01 / START WITH YOUR NUMBERS
How to use the interest calculator
Add your starting balance
Enter the money already saved. Zero is valid if you are starting with monthly contributions only.
Choose a monthly contribution and term
Contributions are added at the end of each month. The final month's contribution earns no interest before the projection ends. Use zero contributions to explore a single lump sum.
Select the interest method
Compound mode uses an annual equivalent rate and adds interest to the balance monthly. Simple mode uses an annual simple rate and calculates interest only on cash you have contributed, not on earlier interest.
02 / THE NUMBERS IN PRACTICE
A worked example
The starting example puts £5,000 into savings, adds £200 at the end of each month and uses 4% AER over five years. All figures are before tax, fees and inflation, with the same rate throughout.
£19,319.07
- Starting balance
- £5,000.00
- New monthly contributions
- £12,000.00
- Total money added
- £17,000.00
- Interest earned
- £2,319.07
Fixed illustration using the starting inputs, separate from the live calculator above. Displayed amounts are rounded.
Contributions arrive at the end of each month. Compound mode converts AER to an equivalent monthly rate. Simple mode accrues interest only on cash contributed. No tax, withdrawals, fees or rate changes.
03 / UNDERSTAND YOUR RESULT
Simple interest and compound interest do different things
In compound mode, the balance includes previous interest, so later interest can be earned on both your money and earlier interest. In simple mode, interest is tracked as part of the final balance but is not itself used to calculate the next interest amount.
With a £1,000 lump sum, no additions and a 4% annual rate, one year produces £40 of interest in either mode. Over two years, simple interest gives £80 while compounding at 4% AER gives £81.60. The difference comes from earning interest on the first year's interest.
04 / UNDERSTAND YOUR RESULT
Use AER consistently when comparing savings
Compound mode converts the annual equivalent rate to a monthly rate that produces the same annual growth. It does not simply divide AER by 12. A 4% AER therefore grows an untouched balance by exactly 4% over a year in this model.
The calculator keeps rates and contributions constant. It does not apply account limits, introductory-rate expiry, withdrawals or tax. A real account's credited interest can also depend on the exact deposit dates. MoneyHelper's savings guidance provides background on building a savings habit.
PLAIN ENGLISH, PLEASE
Interest glossary
The terms behind the inputs and results, explained without the guesswork.
- Starting balance
- The amount in the projection before the first month's interest.
- Monthly contribution
- New money added at the end of each month.
- AER
- Annual equivalent rate. In compound mode it describes a full year's growth including compounding.
- Compound interest
- Interest calculated on a balance that includes earlier interest.
- Simple interest
- Interest calculated only on contributed cash, with no interest on previous interest.
- Money added
- Starting balance plus all new monthly contributions.
- Final balance
- Total money added plus projected interest, before tax or other deductions.
BEHIND THE ESTIMATE
How the calculation works
For compound mode, the monthly rate is (1 + AER ÷ 100) raised to 1/12, minus one. Each month we multiply the current balance by one plus that rate and then add the monthly contribution.
For simple mode, monthly interest is contributed cash at the start of the month multiplied by the annual simple rate divided by 12. Earlier interest is excluded from that base. We record the balance every twelve months and subtract total money added to show interest earned.
Sources and further reading
Examples use Switcha’s calculation model above. Supporting information and linked guidance checked on 10 September 2026.