How compound interest can super charge your generosity
When it comes to managing our finances, deciding how to invest our money is one of the most significant choices we make. As Christians, how should we approach these decisions practically, but with an eternal perspective?
Ross Ellis-Butcher, Marketing Executive
4 min read
What are interest and compound interest?
Interest refers to the money a bank or financial institution pays you for keeping your money in a savings account. It is expressed as a percentage of the savings balance and may be paid monthly, quarterly or annually. Compound interest means earning interest on both your initial savings and on the interest that you receive over time.
For example, if you save £1,000 at an interest rate of 1%, after one year, you’d earn £10, making your total £1,010.
In the second year, you’d earn more interest on your savings as 1% of £1,010 is £10.10. That extra 10p is compound interest, earning interest on interest.
Why does this matter to me?
With small amounts of money or across short timeframes, the impact of compound interest is minimal. Over many years though, or with sizable saving pots, compound interest can play a significant role in determining how much money you save.
An illustrative story: Sam and Ash
(Fictional) Sam and Ash both want to save money for their children going to university. Sam chooses to save £30 a month from the birth of his child. Ash chooses to start saving when his child starts secondary school. They both choose to save in a Kingdom Bank Instant Access Gospel Account.
All interest rates are correct as of June 2025.
| Saved each month | Years saved | Total saved | Interest rate | Final balance | Interest | |
|---|---|---|---|---|---|---|
| Sam | £35 | 18 | £7,560 | 2.5% | £9,535.31 | £2,000 |
| Ash | £100 | 7 | £8,400 | 2.5% | £9,169.41 | £800 |
Sam saves almost £1,000 less into the account over its lifetime, but ends with a higher balance by over £300 thanks to the effect of compound interest.
As well as this, Sam and Ash also save for retirement. Again, Sam begins saving early, as soon as he starts working. Ash starts saving when he turns 45. They both retire at 65. They save into a Kingdom Bank 120-day Notice Account.
| Saved each month | Years saved | Total saved | Interest rate | Final balance | Interest (to nearest £) | |
|---|---|---|---|---|---|---|
| Sam | £100 | 44 (from 21 to 65) | £52,800 | 3.05% | £110,957.88 | £58,158 |
| Ash | £250 | 20 (from 45 to 65) | £60,000 | 3.05% | £82,525.34 | £22,525 |
Sam’s pension is over £25,000 more than Ash’s, despite the fact Ash contributed over £7,000 more towards his.
Debt and compound interest
It’s common for compound interest to be a feature of mortgages. In these cases, as a borrower, you’ll be paying the interest.
To reduce the interest you pay, some providers will offer the ability to overpay on your mortgage. If you have a £200,000 mortgage at 6% over 25 years, overpaying by £50 a month could save you over £60 a month in interest*. In other words, a little extra repayment now can lead to big savings later.
How is this useful for the gospel?
By understanding compound interest, you can grow your savings and reach your financial goals sooner. This means money you would have been putting into savings each month could instead be added to your giving. For organisations, setting aside a relatively small amount each month over a longer period can build funds for building projects, contingency budgets and outreach plans more effectively than saving larger sums when a sudden need arises.
In some cases, a relatively small extra amount of available money can have a big long-term impact. In this example two churches run a giving programme for a new building, church A for 6 years, and B for 2 years. They both receive the same total amount in giving and save in a Kingdom Bank Organisation 120-Day Notice account.
| Saved each month | Total amount saved | Final balance | Interest | Difference | |
|---|---|---|---|---|---|
| Church A (Saves for six years) | £10,000 | £720,000 | £783,022.02 | £63,022.02 | +£43,367.35 |
| Church B (Saves for two years) | £30,000 | £720,000 | £739,654.67 | £19,654.67 |
The additional interest received by church A could pay for cost saving measures, double glazing, insulation, building work to make it more attractive for leasing. As an example twenty solar panels cost £13,500 or so, yet could save around £175 a month.
Awareness of concepts like compound interest can also help to inform your decisions on borrowing. If you or your organisation own property, it’s worth considering whether you could overpay on your mortgage to save on interest repayments in the long run. The less you need to pay towards your mortgage, the more money you can use to bless others through giving.
How does your bank use your money?
Another factor to consider is how your bank uses your money. At Kingdom Bank, we use all savings placed with us and interest earned on borrowing to provide mortgages to gospel ministries. This means that, unlike with a high street bank, your savings, and even your interest repayments on your mortgage, are supporting mission and increasing your Kingdom impact. Start saving with Kingdom Bank today and give your money a mission.
Kingdom Bank does not provide financial advice. Please seek independent financial advice when structuring your finances.
*Making this overpayment will save around £17,620 over the lifetime of the mortgage, if you spread that saving out across each month of the 23 years you’d be repaying the mortgage for, it’s a monthly saving of £63.84.
About the author
Ross has been a Marketing Executive at Kingdom Bank since 2024, with experience in high street and start-up banks. He is passionate about facilitating positive and effective communication and engagement between the Bank and its customers.
Ross Ellis-Butcher, Marketing Executive
