The full numbers at different returns
Exactly how much £500 a month grows depends on the return you assume. The table below uses monthly compounding — the same model as the Casvia savings calculator — with no fees and no taxes (using an ISA wrapper keeps it that way).
| Annual return | Final value | You invested | Growth |
|---|---|---|---|
| 4% | £183,387 | £120,000 | £63,387 |
| 5% | £205,517 | £120,000 | £85,517 |
| 7% | £260,463 | £120,000 | £140,463 |
| 8% | £294,510 | £120,000 | £174,510 |
Hypothetical constant annual returns, monthly compounding, £500 paid in each month for 20 years. Actual investment results vary.
What your £120,000 actually becomes
In every row, you contribute the same £120,000 over 20 years (£500 × 12 × 20). The difference between the rows is entirely growth — which is the part compounding adds on top of your own money. At 7%, growth accounts for more than half the final balance. That is the core argument for starting early and staying invested: the later years of compounding do more work than the earlier ones.
What inflation does to that number
£260,463 is the nominal figure — what it says in pounds on the day. After 20 years of 3% inflation, that pot buys roughly what £144,000 buys today. That does not make saving pointless; it is exactly why a return above inflation matters, and why keeping long-term savings in a Cash ISA paying little interest often loses purchasing power over decades. See the UK inflation calculator to model it.
Does the time horizon matter more than the amount?
For long-term saving, time usually matters more than the monthly amount. The same £500 a month over 10 years at 7% is worth about £86,542 — around a third of the 20-year figure — even though you have only saved half as much money. The extra decade roughly triples the outcome, because growth compounds on growth. If you can, starting earlier beats saving more later.
Where to put the money
For money you will not need for several years, an ISA is usually the right first home: interest, dividends and gains are all tax-free inside it. A Stocks & Shares ISA is the common choice for long horizons; a Cash ISA suits shorter horizons or low risk tolerance. Employer pension contributions should generally come first because of the free money and tax relief. See our pension calculator for the retirement version of this maths.