Compound interest is a mathematical principle that can help your money grow without lifting a finger. By regularly investing small amounts of cash and letting those increases build upon each other over time, the power of compounding can dramatically boost your returns. In the video below, Clare Francis, our Director of Savings & Investments, explains how this works and shows you some compound interest examples in pounds and pence.

You can benefit from top compound interest investments UK effect with cash savings accounts, but it’s often much greater with investments. This is because you can reap the reward of rising share prices, plus reinvest dividends (the shares the company pays out each year as a reward for holding its stock) to turbocharge your returns.

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It’s important to understand that the compounding figures shown here don’t take inflation into account – rising living costs over time can significantly reduce the spending power of your money – and that you might need to pay tax on any returns or fees you may incur. However, by following a sensible investment strategy and planning ahead, you can maximize the benefits of compounding for your long-term financial goals.

Our top compound interest investments UK include certificates of deposit, fixed-rate bonds and share ISAs. They offer higher yields than money market and high-yield savings accounts, but you need to lock your funds in for a set term and are likely to be liable for early withdrawal penalties. Investing your money in these assets can also allow you to take advantage of tax breaks, such as those offered by ISAs and pension funds, which can help to boost your returns even further.