How compound interest works
Compound interest means you earn interest on your interest. In the first year you earn interest on what you paid in. In the second year you earn it on your deposits plus last year's interest, and so on. The effect is small at first and grows quickly over longer periods.
This calculator assumes interest is added monthly at a rate equivalent to the AER you enter, and that deposits are made at the end of each month.
Making the most of your savings
Start early, because time does most of the work. Saving £200 a month at 4% for 10 years builds a balance of around £29,300, of which about £5,300 is interest. Keep an eye on bonus rates that drop after 12 months, and use your ISA allowance to keep interest tax-free.