Albert Einstein reportedly called compound interest the eighth wonder of the world. Whether that quote is accurate or not, the mathematics is real and powerful. Small, consistent investments compounded over long periods grow into dramatically larger sums than most people expect. Our free Compound Interest Calculator shows exactly how much your money will grow — with a year-by-year breakdown and a comparison against simple interest.
Compound Interest Formula
The standard compound interest formula is: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of times interest is compounded per year, and t is the time in years. The key insight is that interest earns interest — each period your accumulated interest is added to the principal, and the next period you earn interest on that larger base.
Compounding Frequency Matters
The same annual interest rate produces different final amounts depending on how frequently it compounds. For a Rs 1 lakh investment at 12% for 10 years: annual compounding gives Rs 3,10,585; monthly compounding gives Rs 3,30,039; and daily compounding gives Rs 3,31,945. Monthly compounding — the most common for FD, RD, and mutual fund returns — gives noticeably better results than annual compounding.
Compound Interest vs Simple Interest
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus all accumulated interest. For short time horizons, the difference is small. For long time horizons (10, 20, or 30 years), compound interest produces dramatically higher returns. Our calculator shows both side by side so you can see exactly how much extra you earn from compounding.
Real World Examples
- FD of Rs 5 lakh at 7% for 5 years (quarterly) — Grows to Rs 7,09,946
- SIP of Rs 10,000/month at 12% for 20 years — Becomes Rs 99.9 lakh
- Rs 1 lakh at 15% for 30 years (annual) — Grows to Rs 66.2 lakh
Calculate Your Returns Now
Open the free Compound Interest Calculator, enter your principal, rate, time, and compounding frequency, and see your year-by-year growth table instantly. No login required.
