Compound Interest Calculator
Calculate compound interest on investments and deposits. Compound interest includes interest on previously earned interest.
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Investment Details
Results
Investment Growth
Returns vs Principal
Year-wise Breakdown
| Year | Principal | Interest | Total Amount | ROI % |
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What is a Compound Interest Calculator?
A compound interest calculator helps you determine how much your investments or savings will grow over time when interest is calculated on both the principal amount and previously earned interest. Unlike simple interest, compound interest allows your money to grow exponentially because you earn returns on your returns. This is often called "the eighth wonder of the world" and is the foundation of long-term wealth creation.
Our compound interest calculator shows year-wise growth, total interest earned, and helps you understand the power of compounding. It's essential for planning investments in fixed deposits, mutual funds, savings accounts, and other financial instruments where interest compounds.
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Compound Interest Formula
The compound interest formula is:
Where:
- A = Final amount (Principal + Interest)
- P = Principal amount (initial investment)
- r = Annual interest rate (in decimal form)
- n = Number of times interest compounds per year
- t = Time period in years
Example: ₹1,00,000 at 10% annual interest, compounded quarterly for 5 years: A = 1,00,000 × (1 + 0.10/4)^(4×5) = ₹1,63,861
Compound Interest vs Simple Interest
Compound Interest: Interest calculated on principal + previously earned interest. Your money grows faster over time.
Simple Interest: Interest calculated only on the principal amount. Growth is linear.
Key Difference: Over long periods, compound interest significantly outperforms simple interest. For example, ₹1 lakh at 10% for 10 years:
- Simple Interest: ₹2,00,000 (₹1 lakh principal + ₹1 lakh interest)
- Compound Interest: ₹2,59,374 (₹1 lakh principal + ₹1,59,374 interest)
The difference of ₹59,374 shows the power of compounding!
Compounding Frequency
Interest can compound at different frequencies:
- Annually: Once per year (n=1)
- Semi-annually: Twice per year (n=2)
- Quarterly: Four times per year (n=4) - common for FDs
- Monthly: Twelve times per year (n=12) - common for savings accounts
- Daily: 365 times per year (n=365) - maximum compounding
More frequent compounding means higher returns. For the same rate and time, daily compounding yields more than monthly, which yields more than quarterly.
Rule of 72
The Rule of 72 is a quick way to estimate how long it takes to double your money:
Examples:
- At 8% interest: 72 ÷ 8 = 9 years to double
- At 12% interest: 72 ÷ 12 = 6 years to double
- At 6% interest: 72 ÷ 6 = 12 years to double
This rule helps you quickly estimate investment growth without complex calculations.
Best Investments for Compound Interest
Investments that benefit from compound interest:
- Fixed Deposits: 6-7% annual returns, safe and guaranteed
- Mutual Funds (SIP): 10-15% annual returns, higher risk but higher returns
- PPF: 7-7.5% annual returns, tax-free and safe
- Equity Stocks: 12-15% long-term returns, requires expertise
- Recurring Deposits: Similar to FDs, regular monthly investments
Start early and invest regularly to maximize the power of compounding over time.
About Compound Interest
Compound interest is calculated on the principal amount plus any previously earned interest. This means your investment grows faster over time as interest is earned on interest.
Compound Interest Formula
A = P × (1 + r/n)^(n×t)
Where:
- A = Final amount (Principal + Interest)
- P = Principal amount
- r = Annual interest rate (in decimal)
- n = Number of times interest is compounded per year
- t = Time period in years
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