Best Savings Account For Lump Sum

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):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Compound Interest Formula?

The compound interest formula calculates the future value of a lump sum investment by accounting for interest earned on both the initial principal and accumulated interest over time. It helps identify the best savings account for maximizing returns.

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 of investment (£)
\( P \) — Initial principal/lump sum (£)
\( r \) — Annual interest rate (decimal)
\( n \) — Number of compounding periods per year
\( t \) — Time in years

Explanation: The formula calculates how much your money grows when interest is compounded at regular intervals, making it essential for comparing savings accounts.

3. Importance of Savings Calculation

Details: Calculating future value helps identify the best savings account for your lump sum, maximizing returns based on interest rates and compounding frequency. As of September 2025, UK easy access accounts offer up to 4.75% (MoneySavingExpert).

4. Using the Calculator

Tips: Enter lump sum in £, annual interest rate as decimal (e.g., 0.0475 for 4.75%), compounding periods per year (e.g., 12 for monthly), and time in years. All values must be valid (principal > 0, rate ≥ 0, periods ≥ 1, time > 0).

5. Frequently Asked Questions (FAQ)

Q1: What is the best interest rate currently available?
A: As of September 2025, UK easy access savings accounts offer up to 4.75% according to MoneySavingExpert.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (e.g., monthly vs annually) yields higher returns due to interest being calculated and added more often.

Q3: Should I choose easy access or fixed-term savings?
A: Easy access offers flexibility but lower rates; fixed-term usually offers higher rates but locks your money for a set period.

Q4: Are savings accounts protected?
A: In the UK, savings up to £85,000 per person per financial institution are protected by the FSCS.

Q5: How accurate is this calculator for real savings?
A: It provides theoretical maximum returns; actual returns may vary slightly due to rounding practices and specific account terms.