Best Lump Sum Savings Accounts

Compound Interest Formula:

\[ FV = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Lump Sum Principal (P):

Annual Interest Rate (r):

decimal

Compounding Periods Per Year (n):

Time (t):

years

Future Value (FV):

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1. What is Compound Interest?

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It allows savings to grow faster as interest is earned on both the original amount and the interest already earned.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ FV = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Where:

\( FV \) — Future Value (currency)
\( P \) — Lump Sum Principal (currency)
\( r \) — Annual Interest Rate (decimal)
\( n \) — Number of Compounding Periods Per Year (unitless)
\( t \) — Time in Years (years)

Explanation: The formula calculates how much your savings will grow over time with compound interest, taking into account the frequency of compounding.

3. Best UK Savings Accounts

Details: As of September 2025, the best easy access savings accounts in the UK offer up to 4.75% interest (according to MoneySavingExpert). Always check current rates as they change frequently.

4. Using the Calculator

Tips: Enter your principal amount in pounds, annual interest rate as a decimal (e.g., 0.0475 for 4.75%), number of compounding periods per year (e.g., 12 for monthly), and time in years.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How often do savings accounts typically compound?
A: Most savings accounts compound interest daily or monthly, though this varies by provider.

Q3: Are savings account interest rates fixed or variable?
A: Many easy access accounts have variable rates that can change, while fixed-term accounts usually offer fixed rates.

Q4: Is interest earned on savings taxable?
A: In the UK, you have a Personal Savings Allowance. Basic rate taxpayers can earn £1,000 interest tax-free, higher rate taxpayers £500.

Q5: Should I choose easy access or fixed-term savings?
A: Easy access offers flexibility but lower rates, while fixed-term accounts typically offer higher rates but require locking your money away.