Results are estimates for guidance only and do not constitute financial advice. Always consult a qualified professional.
How to Use the Savings Calculator
- Enter your initial deposit — type the lump sum you are starting with. Enter 0 if you are starting from scratch.
- Set your monthly contribution — enter the amount you plan to save each month. Consistency is key to building savings.
- Enter the interest rate — use the AER (Annual Equivalent Rate) from your savings account. Try different rates to compare options.
- Choose the time period — specify how many years you plan to save for.
- Click "Calculate" — the calculator shows your final amount, total contributions, and total interest earned.
- View the year-by-year table — click the toggle to see how your savings grow each year with a detailed breakdown.
How Savings Growth Works
Savings grow through the combination of regular contributions and compound interest. Each month, your contribution is added to the balance, and interest is calculated on the entire amount including previously earned interest. This creates a compounding effect where your interest itself earns interest, accelerating growth over time. The calculator uses monthly compounding, which is the most common frequency for UK savings accounts. The monthly interest rate is derived by dividing the annual rate by 12. For each month, the balance is multiplied by (1 + monthly rate), then the monthly contribution is added. Over long periods, compound interest can contribute a surprisingly large portion of the final amount. For example, saving £200 per month at 4.5% for 20 years would yield approximately £75,000 in contributions but over £25,000 in interest alone. This demonstrates why starting early and maintaining consistent contributions is so powerful for building wealth.
How does a savings calculator work?
A savings calculator projects your future balance by applying compound interest to your initial deposit and regular monthly contributions over your chosen time period. It calculates interest on the growing balance each month, showing how your money accumulates over time through both contributions and earned interest.
What interest rate should I use?
Use the Annual Equivalent Rate (AER) advertised by your savings account provider. UK easy-access accounts typically offer 3-5% AER, while fixed-rate bonds may offer higher rates for locking your money away. Cash ISAs have similar rates but with tax-free interest.
Is savings interest taxed in the UK?
Most UK adults get a Personal Savings Allowance: basic rate taxpayers can earn £1,000 in interest tax-free per year, and higher rate taxpayers £500. Additional rate taxpayers have no allowance. Interest earned in an ISA is always tax-free regardless of the amount earned.
What is the difference between AER and gross rate?
AER (Annual Equivalent Rate) accounts for the effect of compounding and shows the true annual return. The gross rate is the simple interest rate before compounding is applied. AER is always equal to or higher than the gross rate and is the best figure to use when comparing savings accounts.
How much should I save each month?
A common guideline is to save at least 20% of your take-home pay, following the 50/30/20 budgeting rule: 50% for essential needs, 30% for discretionary wants, and 20% for savings and debt repayment. The best amount depends on your income, expenses, and financial goals.
What is the UK ISA allowance?
The UK ISA allowance for the 2024/25 tax year is £20,000. This is the maximum you can deposit across all ISA types (Cash ISA, Stocks and Shares ISA, Lifetime ISA, etc.) in a single tax year. All interest or gains within an ISA are completely tax-free.
