Compound Interest Calculator
See how your money grows with compound interest over time — daily, monthly, quarterly or yearly compounding.
The compound interest calculator shows how an initial investment grows when the interest you earn is reinvested and starts earning interest of its own. It is one of the most useful tools for planning long-term savings, comparing fixed deposits, or simply understanding how much your money can grow if you leave it invested.
How to use the calculator
- Enter the initial amount you plan to invest or deposit.
- Add the annual interest rate you expect to earn.
- Set the time period in years (fractions allowed, e.g. 2.5).
- Pick how often interest is compounded — yearly, half-yearly, quarterly, monthly or daily.
- Press Calculate Growth to see the maturity value, the interest earned and the true effective annual rate.
Compound interest formula
Where A is the maturity amount, P is the principal, r is the annual rate (as a decimal), n is the number of compounding periods per year and t is time in years. The interest earned is A − P.
Worked example
₹1,00,000 at 10% p.a., compounded monthly for 10 years
A = 1,00,000 x (1 + 0.10/12)120 ≈ ₹2,70,704.
Interest earned ≈ ₹1,70,704 — more than the original investment, purely from compounding.
Notice that the effective annual rate at 10% compounded monthly is about 10.47%, which is why this calculator shows it separately.
Who should use this calculator
- Long-term investors who want to see how the length of the holding period changes the outcome, not just the rate.
- Anyone deciding between a simple-interest product and a compounding one, and wanting to compare them fairly.
- Savers modelling a fixed deposit, a bond, or a long-term goal where a steady rate is a reasonable assumption.
- Parents and students learning the maths behind savings, where the rule of 72 makes the idea concrete.
Common mistakes to avoid
- Comparing compounding with simple interest at face value. A 10% simple-interest product and a 10% compounding product are not the same, and the gap grows every year.
- Ignoring inflation. A 10% return with 6% inflation is only about a 3.8% real return. The nominal figure flatters almost every long-term plan.
- Expecting compounding to work quickly. Over two or three years the difference between simple and compound interest is small. The effect is a long-term one.
- Assuming a fixed annual return for a market product. Equity returns arrive unevenly; a bad year at the start can change the outcome significantly even if the average is right.
- Forgetting tax on gains. Tax on interest or capital gains reduces the amount that compounds in the next period.
The rule of 72 and what it really means
Divide 72 by the annual rate to get the rough number of years it takes your money to double. At 8% that is about nine years; at 12%, about six. The rule is a shortcut, but it makes the central point clear: the rate matters, but the number of doubling periods matters more.
₹1 lakh growing at 12% becomes roughly ₹2 lakh in six years, ₹4 lakh in twelve and ₹8 lakh in eighteen. Each doubling requires the same number of years, which is why stopping five years early can cost you the entire final doubling. Anyone deciding whether to stay invested should think in doublings rather than in percentages.
Compounding terms explained
- Compounding frequency
- How often interest is added to the principal — yearly, half-yearly, quarterly, monthly or daily. More frequent compounding gives a slightly higher effective return.
- Effective annual rate
- The real yearly return once compounding within the year is taken into account. It lets you compare products with different frequencies.
- Rule of 72
- A quick estimate of how long money takes to double: 72 divided by the annual return in percent.
- Real return
- Return after inflation. It is what actually grows your purchasing power.
- Nominal return
- The headline rate before subtracting inflation and taxes.
Frequently asked questions
What is compound interest?
Compound interest is interest calculated on the initial principal plus the interest accumulated in earlier periods. Because interest earns interest, money grows faster than with simple interest. The longer your money stays invested, the more powerful compounding becomes — often called the eighth wonder of the world.
Does the compounding frequency matter?
Yes. The more frequently interest is compounded, the slightly higher the effective return for the same nominal rate. For example, at 10% p.a., daily compounding earns a little more than yearly compounding. Use the compounding frequency dropdown in this calculator to compare.
What is the effective annual rate?
The effective annual rate (EAR) is the real yearly return after accounting for how often interest is compounded within the year. It lets you compare products with different compounding frequencies on a like-for-like basis. For example, 12% compounded monthly gives an effective rate of about 12.68%.
Is compound interest used in banks and loans?
Yes. Most savings instruments, fixed deposits (with quarterly compounding), loans and investments like mutual funds and stocks rely on compound growth. Note that on loans, compounding can also increase the cost of unpaid interest, which is why it is best to pay credit card balances in full.