There was a time when interest was compounded quarterly on savings accounts where interest was paid on the initial sum.
However, most interest is compounded daily these days so you do get significantly more for your money than you would if interest were only compounded quarterly. (Compound interest means interest paid on top of interest as it is earned along the way, instead of simple interest on the original amount that doesn’t vary.)
Although there are interest calculators to use when taking out loans, they operate a bit differently so when looking for a compound interest calculator, most people want to see how much they can make from interest on a savings account or some other type of investment product.
Where to Find an Interest Calculator
Whilst some of us know the complex formulas which to into calculating compound interest, others of us would rather just plug in a few numbers and let a program calculate interest for us.
The wonderful thing about the internet is that you can simply go online and find a free interest calculator that is extremely easy to use and within moments you can figure out interest on literally any amount, for any period of time imaginable.
Why Use a Compound Interest Calculator?
Most of the time when searching for an interest calculator, we are looking to see where best to place investment capital. Of course, you want the highest interest rate possible when looking for an investment, but you also want to know how that interest is going to be paid. Will it be paid daily, quarterly, semi-annually or annually?
This tool acts as a monthly interest calculator, allowing you to clearly see your interest rate on the initial sum that you’ve saved.
Believe it or not, how interest is paid is almost as important as the rate you will be getting – if not more important, in some cases. The reason for this is because most financial institutions have interest rates which are fairly standardised based on rates established by the BoE.
How to Use a Savings Interest Calculator
Another nice aspect of a savings interest calculator is the ease at which they can be used. They are simply online software programs which you literally plug in values to fillable fields, hit calculate and within moments the answer is there on the screen.
As an example, if you are looking to see what you would earn on interest at the end of one year by placing £50 in a savings account each month, the fields you would be required to fill in would look something like this.
- Interest rate
- Savings period
- Monthly payments
- Lump sum payment
And that is all there is to it! If the bank gives you compound interest, you will quickly see how much your investment is valued at after a given time period.
Sometimes people start with a lump sum and then add to it monthly, other times they just want to start saving/investing a certain amount each month.
In either case, a UK interest calculator can quickly tell you how much your investment will be worth at any point in the future. What a great tool when you are looking to see which investment or savings account will net you the most amount of money.