Compounding is the single most powerful force available to a long-term investor, and also one of the least intuitive. Our brains are good at understanding linear change — add a fixed amount each year and the total rises in a straight line — but they consistently underestimate exponential change, where growth is earned on previous growth. The calculator above makes that process visible. Adjust the assumptions and watch how the gold band (investment growth) gradually overtakes the navy band (the money you actually contributed).
How the calculator works
The calculator runs a month-by-month simulation. It starts with your initial investment, then for each month of the time horizon it applies the monthly equivalent of your expected annual return (after fees) and adds your monthly contribution at the end of the month. At the end of each year, the monthly contribution is increased by the "annual contribution increase" percentage, reflecting the fact that many people raise their savings as their income grows.
Five results are shown:
- Value after N years — the projected balance in future (nominal) money.
- Total contributed — the initial investment plus every monthly contribution.
- Investment growth — the difference between the two: what compounding added.
- In today's money — the final balance discounted by your inflation assumption, so you can judge its real purchasing power.
- Growth multiple — the final balance divided by total contributions.
Hover over the chart to see the balance, contributions and growth for any year, or open the year-by-year table for the full breakdown.
Choosing sensible assumptions
The output is only as good as the inputs. A few principles help keep assumptions realistic.
Expected return
Long-run historical data from major developed markets suggests that diversified equity portfolios have delivered nominal returns in the high single digits per year over many decades, while high-quality government bonds have delivered considerably less. Those averages conceal enormous variation: individual years have ranged from sharp double-digit losses to strong double-digit gains, and some decade-long periods have produced little or no real return at all. A balanced portfolio that mixes shares and bonds would historically have earned something between the two.
Because the future may not resemble the past, many planners deliberately use conservative figures and test a range — for example running the same plan at 4%, 6% and 8% — rather than relying on a single number. The calculator makes this easy: move the slider and compare.
Fees
Fees are one of the few variables an investor can control with certainty. A fund's ongoing charge, a platform fee and an adviser's fee can together add up to a meaningful percentage every year. Because fees are deducted from the return annually, their impact compounds over time exactly like growth does. Try setting fees to 0.2% and then to 1.5% on a 30-year horizon: the difference in the final balance is often far larger than the headline percentages suggest.
Inflation
A pound, dollar or euro in thirty years will almost certainly buy less than it does today. Many central banks target inflation of around 2% a year, but actual inflation has at times been much higher. The "in today's money" figure applies your inflation assumption to the final balance so you can compare it with the prices you see now. When setting financial goals, it is usually more meaningful to think in real terms.
Contribution increases
Raising contributions in line with salary growth is one of the simplest ways to improve outcomes. Even a modest annual increase of 2–3% makes a noticeable difference over long periods because the later, larger contributions still have years to compound.
A worked example
Using the default settings — a 10,000 initial investment, 500 per month, 6% expected return, 0.3% fees, 2% annual contribution increase and 25 years — the chart shows how, in the early years, the balance is dominated by contributions. Growth is a thin sliver on top. Somewhere in the second half of the period, the growth band becomes as large as the contribution band, and by the end it represents a substantial share of the total.
Now change only one thing: extend the horizon from 25 to 35 years. Contributions rise by a proportionally modest amount, but the final balance increases dramatically, because the money already invested has ten more years to compound. This is the practical meaning of the old saying that time in the market matters more than timing the market.
The rule of 72 and other shortcuts
You do not always need a calculator. The rule of 72 gives a quick estimate of doubling time: divide 72 by the annual percentage rate. At 8%, money doubles in about nine years; at 4%, in about eighteen. The same rule works for costs and inflation: at 3% inflation, prices double in roughly 24 years, halving the purchasing power of cash that earns nothing.
A second useful habit is thinking in "doublings". Someone who invests at 25 and retires at 65 has forty years — at a 7% return, that is roughly four doublings, turning each unit invested at the start into about sixteen. Money invested at 45 has only twenty years, or about two doublings, turning each unit into about four. That arithmetic explains why starting early matters so much.
What the calculator does not show
Any simple projection involves simplifications. Before relying on the output, keep these limitations in mind:
- Volatility and sequence risk. Real portfolios do not grow at a steady rate. A severe downturn shortly before you need the money can have a much larger effect than the same downturn early on — a risk known as sequence-of-returns risk.
- Taxes. The calculator ignores taxes on income, dividends and capital gains, which vary widely by country and account type. Tax-advantaged accounts can significantly change real-world results.
- Withdrawals. It models the accumulation phase only, not drawing an income in retirement.
- Currency risk. Investments held in a different currency from your spending can gain or lose value from exchange-rate movements.
- Behaviour. Projections assume you keep investing through good and bad markets. In practice, stopping contributions or selling during a downturn is one of the most common ways investors fall short of their plans.
Turning results into a plan
A projection is a starting point for questions, not an answer. If the "in today's money" figure falls short of what you think you will need, there are only a handful of levers: contribute more, start earlier, invest for longer, reduce costs, or accept a different level of risk in pursuit of a higher expected return — with all the uncertainty that implies. Each lever has trade-offs, and the right combination depends on your circumstances.
Our guide to building a long-term wealth plan walks through setting goals and priorities, while asset allocation explained covers how the mix of investments affects both expected return and the size of the swings along the way. For decisions with significant consequences, consider speaking to a qualified, regulated financial adviser in your jurisdiction — and check their registration using the official regulator register, as described in our Investor Security Center.
Frequently asked questions
Is the calculator's return compounded monthly or annually?
Monthly. The annual return you enter (after fees) is converted into an equivalent monthly rate so that twelve months of compounding produce exactly the annual figure.
Why does the "in today's money" figure look so much lower?
Because inflation compounds too. Over several decades, even moderate inflation substantially reduces purchasing power. The nominal figure is what your statement would show; the real figure is what it would buy in today's prices.
Does the calculator store my data?
No. All calculations run in your browser and nothing you enter is sent to our servers.