Compound Interest Calculator
See how your investments grow with the power of compound interest over time.
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Total Interest
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Principal
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Principal vs Interest
Year-wise Growth
Year-by-Year Breakdown
| Year | Principal | Interest Earned | Total Value |
|---|
What is Compound Interest?
Compound interest is often called the "eighth wonder of the world." It is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods. In simple terms, you earn interest on your interest, creating a snowball effect that accelerates your wealth growth over time.
Unlike simple interest (which is calculated only on the original principal), compound interest makes your money grow exponentially. The longer you stay invested, the more dramatic the effect becomes.
Compound Interest Formula
A = P × (1 + r/n)nt
Where:
- A = Final amount (principal + interest)
- P = Principal (initial investment)
- r = Annual interest rate (decimal)
- n = Number of times interest is compounded per year
- t = Number of years
The Power of Compounding: An Example
| Years | Simple Interest (8%) | Compound Interest (8% quarterly) | Difference |
|---|---|---|---|
| 5 | ₹1,40,000 | ₹1,48,595 | ₹8,595 |
| 10 | ₹1,80,000 | ₹2,20,804 | ₹40,804 |
| 20 | ₹2,60,000 | ₹4,87,544 | ₹2,27,544 |
| 30 | ₹3,40,000 | ₹10,76,516 | ₹7,36,516 |
Based on ₹1,00,000 principal at 8% annual rate.
Tips to Maximize Compound Interest
- Start early. Time is the most powerful factor in compounding. Starting 10 years earlier can double your final corpus.
- Choose higher compounding frequency. Quarterly or monthly compounding yields more than annual.
- Reinvest your returns. Don't withdraw interest earnings; let them compound.
- Be patient. Compound interest shows dramatic results in later years. Stay invested for the long term.
- Increase contributions over time. Even small increases in your principal boost the compounding effect.
Try the Calculator
Enter your investment amount and see how compound interest grows your wealth over time.
Calculate NowFrequently Asked Questions
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, your money grows exponentially as interest earns interest over time.
Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal plus previously earned interest. Over time, compound interest produces significantly higher returns.
More frequent compounding leads to higher returns. Daily compounding earns slightly more than monthly, which earns more than quarterly. However, the difference decreases as frequency increases.
The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by the annual interest rate. For example, at 8% interest, your money doubles in approximately 72/8 = 9 years.
Compound interest is earned on savings accounts, fixed deposits, recurring deposits, PPF, mutual funds, and many other investment vehicles. The key is to choose instruments that compound frequently and reinvest returns.