What inflation rate should I use?

The Bank of England targets 2% inflation. Historical UK average is roughly 2.5–3%. For conservative planning, 2.5–3% is a reasonable assumption. The calculator lets you adjust this to explore different scenarios.

Are the results shown in today's money?

When you set an inflation rate in Advanced Settings, yes. The final balance shown represents purchasing power equivalent to today's pounds. Without inflation set, results are nominal (future pounds).

How is compound interest different from simple interest?

Simple interest is calculated only on your original principal. Compound interest is calculated on your principal plus all previously earned interest, so your returns generate their own returns. Over long periods, this creates exponential growth.

What rate of return should I expect?

It depends on the investment. Cash ISAs might offer 4–5%, while a diversified stock portfolio has historically averaged 7–10% annually over long periods. Higher returns typically come with higher risk. This calculator lets you explore different scenarios.

How often should interest compound?

More frequent compounding (monthly or daily vs yearly) gives slightly better results, but the difference is usually small. Most savings accounts compound daily, while investments like index funds compound based on market returns.

What real return should I expect?

If you expect 7% nominal returns and 2.5% inflation, your real return is approximately 4.5%. Over 25 years, this still creates substantial compound growth, just less dramatic than nominal figures suggest.

CompoundWise

Turn £200/month into £164,877

Free UK calculator · No signup · Based on ISA investing

By CompoundWise Team·Updated April 2026

Starting amount

£0£20k£200k

Monthly contribution

£0£1k£5k

Expected annual return

Time horizon

yrs

Invest £200/month for 25 years at 7%

£50,491

earned in interest alone

Total value

£110,991

You put in

£60,500

Your money45% from compounding

To reach £110,991, most UK investors use a Stocks & Shares ISA

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Keeping this in a savings account? You'd have ~£6,851 less

Compared to investing at 7% vs a 4% cash savings account

Growth Over Time

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Quick Scenarios

Compounding frequency

Inflation rate

Yearly contribution increase

Inflation adjusts your final balance to show purchasing power in today's money. Contribution increase grows your monthly payment each year.

Your Personalised Insights

Your money earns ~£6/day in interest. That's £50,491 earned while you sleep.
Saving just £50 more per month would add £94,390 to your final balance. That's £15,000 invested for £94,390 extra.
5 more years would add £137,061, nearly 123% more, showing how powerful time is.
Starting 5 years earlier would add £4,786 to your final balance. Every year you wait costs real money.Start investing now →
Consistency beats timing, investing £200/month for 25 years matters more than picking the perfect moment to start.
At your current plan, you reach £100k in 24 years. That's a real milestone, and it compounds from there.Start building towards it →
53% of your total wealth is built in the final 10 years. Patience is everything.

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By the CompoundWise Team · Updated April 2026

UK-based financial education · Not financial advice

Why inflation matters for your savings

Inflation silently erodes the value of money over time. At 2.5% annual inflation, £100 today will only buy about £54 worth of goods in 25 years. When you see a calculator showing your savings growing to £200,000, it's natural to feel excited. But in today's purchasing power, that might only be worth £120,000. This calculator shows you the real picture.

Nominal vs real returns

Nominal returns are the raw percentage your investment grows. Real returns subtract inflation. If your portfolio returns 7% and inflation is 2.5%, your real return is approximately 4.5%. This calculator applies inflation adjustment automatically when you set a rate in Advanced Settings, showing you results in today's money.

How to beat inflation with investing

Cash savings accounts rarely keep pace with inflation over the long term. Equities, property, and inflation-linked bonds have historically outpaced inflation. A diversified stock portfolio averaging 7% nominal returns delivers approximately 4–5% real returns, enough to genuinely grow your purchasing power over time.

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