Compound Interest Calculator

Calculate your investment growth with our compound interest calculator. Enter principal, rate, time, and compounding frequency to see how your money grows and make smarter financial decisions.

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What is Compound Interest?

Compound Interest is the process where the interest you earn on an investment is reinvested, so you earn interest on both the principal and the accumulated interest. Over time, this leads to exponential growth of your wealth.

Benefits of Compound Interest

  1. Exponential Growth: Your money grows faster over time compared to simple interest.
  2. Encourages Long-Term Investing: The longer you stay invested, the more powerful compounding becomes.
  3. Reinvestment Advantage: Interest earned is reinvested automatically, enhancing total returns.
  4. Financial Goal Achievement: Helps in reaching long-term goals like retirement, education, or buying a house.

Compound Interest vs Simple Interest

Simple Interest: Interest is calculated only on the principal.Compound Interest: Interest is calculated on both principal and accumulated interest.
Compound interest generally yields higher returns over long periods due to reinvestment and exponential growth.

Who Can Benefit from Compound Interest?

Anyone investing in interest-bearing instruments can benefit, including:

  1. Fixed deposits and recurring deposits
  2. Mutual funds and equity investments
  3. Pension and retirement accounts
  4. Education or long-term savings plans

Tips to Maximize Compound Interest

  1. Start investing early to give your money more time to grow.
  2. Increase your investment regularly to boost compounding effects.
  3. Choose investments with higher frequency of compounding (monthly/quarterly).
  4. Reinvest all interest and avoid withdrawing prematurely.

Impact of Time on Compounding

Time is the most powerful factor in compounding. Even small amounts invested early can grow substantially over decades.
For example, ₹10,000 invested at 8% annual interest for 20 years becomes around ₹46,610 due to compounding.

Compound Interest Formula

Compound Interest Formula

A=P× (1 +r/n)^(n×t)

Compound Interest Earned

CI=A–P

Continuous Compounding

A=P× e^(r×t)

Future Value of an Annuity

FV=P× [(1 +r/n)^(n×t) – 1] ÷ (r/n)

Present Value of an Annuity

PV=P× [1 – (1 +r/n)^(-n×t)] ÷ (r/n)

Where:

AFinal amount
PPrincipal amount (or periodic payment for annuities)
rAnnual interest rate (decimal)
nCompounding frequency per year
tTime in years
CICompound interest earned
FVFuture value (recurring deposits)
PVPresent value (loans or annuities)
eEuler’s number ≈ 2.718

Example Calculation

Example: Education Fund

A parent invests ₹2,00,000at an annual interest rate of 8%for 15 years.

Comparison: Simple Interest vs Compound Interest

Simple Interest

Total Amount = ₹4,40,000

Interest Earned = ₹2,40,000

Compound Interest

Total Amount ≈ ₹6,34,845

Interest Earned ≈ ₹4,34,845

Key Insight

Over 15 years, compound interest earns nearly ₹1.95 lakh morecompared to simple interest — showing the power of reinvested growth.

Why Compound Interest Matters

Compound interest is essential for long-term financial planning. It boosts retirement savings, investments, and wealth creation. The earlier you start investing, the more time your money has to grow exponentially.

Frequently Asked Questions

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