# Investment Calculator

Growing your money through saving and investing can limit the negative effects of inflation on your wealth. Inflation is a measure of how the prices of goods and services increase over time. As prices rise, your money is able to buy less and less. This means that your cash will lose "real value" if it is not earning interest and growing. What's more, the interest you earn can also earn interest, this is known as compound interest.

## What is compound interest?

Compound interest is the interest you earn on previously earned interest. Your money grows faster when your interest compounds because what you earn is immediately reinvested.

For example, if you earn £100 in interest in year one on a £1,000 investment, in year two you will earn interest on £1,100. After you earn £110 interest in year two, you will earn interest on £1,210 in year three. This is the power of compounding.

## How does our investment calculator work

By adding your investment details to our calculator, you will be able to see how the value of your investment can grow and change over time. You can also see how this potential growth is influenced by market conditions, including varying rates of return and inflation.

In addition, you can find out how the timeframes you apply to your investing strategy can change the amount of money you end up with. Investing is not just about putting a lump sum of money to work. Paying in regularly over a longer period of time can also make a big difference versus adding one big contribution from the start, as you can see from using our investment calculator.

### How to use our investment calculator

Follow these simple steps to use our investment calculator and work out your potential investment returns.

#### Step 1 – Enter the initial amount you plan to invest

This is the sum you will be investing straight away. For example, you could choose to add £1,000 initially.

#### Step 2 – Set the amount & frequency of what you will save/invest

Choose how much you plan to regularly contribute and how frequently you expect the contributions to be made. You could invest a regular amount every month, quarterly, every six months or once a year.

#### Step 3 – Decide how many years you plan to invest for

This could be based on when you hope to retire, when you expect to buy your first home or any other big expenditure. If you do not have a timeframe in mind, try adding 5 years to get an idea of how your investments can grow over that period.

#### Step 4 – Estimate an annual rate of return

There are no guarantees with investments, so unless you are calculating the interest on a fixed-term savings account, this will be an estimate. You could choose a figure based on the past performance of a fund you plan to invest in, or based on how your investments have grown in recent years. Alternatively, you could experiment with different numbers to get an idea of what rate of return you will require to reach your investment goals.

#### Step 5 – Add an annual rate of inflation figure

The Bank of England's inflation target is 2%, though the UK’s current figure may be very different. You could look at the UK’s inflation history to get an idea, but this is another estimate. You could try adding in different inflation figures to see how it can affect the growth of your investments.

#### Step 6 – Click ‘calculate’ to see your results

We will show you your estimated total balance, including your total growth and total contributions. We will also show you the real value of your money (i.e. what it would be worth today). You can use this to check how close you are likely to come to your financial targets and what changes you may need to get nearer to them.

### Investing/savings calculator

Enter the values below to estimate how compound interest will affect your savings.

£
£
yrs
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## What your investment calculator results mean

Your results will show you how much your investments will be worth based on the figures you added to the calculator. You can see the total growth, your total contributions and a real-value figure. You can also see a graph that plots your total growth against your contributions.

Remember that the results you see from our investment calculator are an estimated return based on your contributions, the assumed rate of inflation and the rate of return you set. The figures you see are not guaranteed, but they may give you insight into how you can grow your money over time.

Projections do not always come to pass and market fluctuations can mean you earn more or less than what you expected. It is also difficult to predict an average rate of inflation over a long period of time.

Your money is always at risk when you invest. You may end up with less than you paid in, so keep this in mind when you decide how much you can afford to invest.

Try experimenting with the calculator to see what changes when you play out different scenarios. For example, see how much you will need to pay in to reach a certain goal, or figure out what a change in inflation can mean for the real value of your returns (i.e. what your final amount would be worth in today's money).

## How to work out your savings return with the investment calculator

Our investment calculator also works as a standard compound interest calculator. This means that you can calculate the returns on your savings as well as on your investments.

In fact, you may get more accurate results if you are trying to calculate how much your savings are likely to grow versus what your investment performance is likely to be.

This is because many savings accounts have a set rate of interest, while investments do not. The advantage of our calculator is that it will take into account the compounding effect of earning interest on your money over a number of years.

## How to find high-interest investments

Once you have used our investment calculator to see the potential for your money to grow, you may want to make sure your investments are in the right place. For many people, this will be a tax-free stocks and shares ISA. You can read more in our article ‘The best & cheapest stocks and shares ISA fund platforms’. Alternatively, if you want to put your money in a savings account rather than invest, look at our roundup of the best savings accounts in the UK, which pay the highest interest rates.