Compound Interest is the process of earning interest not only on your initial investment but also on the interest accumulated over time. It’s a powerful wealth-building tool that helps your savings grow exponentially, ideal for long-term financial planning.
It’s widely used in savings accounts, fixed deposits, and investment schemes, making it a cornerstone for investors seeking steady growth.
The frequency of compounding—whether monthly, quarterly, or annually—significantly impacts the final returns.
Unlike simple interest, which is calculated only on the principal, compound interest accelerates wealth creation over time.
1. Enter the initial investment amount (principal).
2. Input the annual interest rate.
3. Specify the investment duration in years.
4. Select the compounding frequency (e.g., monthly, quarterly, yearly).
5. Click "Compute" to view your results.
The calculator will display:
Final Amount = P × (1 + r/n)^(nt)
Where P = principal amount, r = annual interest rate (as a decimal), n = number of compounding periods per year, t = time in years
Interest Earned = Final Amount - Principal
Q: Is compound interest guaranteed?
It depends on the investment; fixed-rate products ensure it, while market-linked ones may vary.
Q: How does compounding frequency affect returns?
More frequent compounding (e.g., monthly vs. yearly) increases the final amount.
Q: Can I calculate compound interest for any investment?
Yes, as long as you know the principal, rate, time, and compounding frequency.
Q: What’s the minimum investment needed?
It varies by product, from small amounts in savings accounts to larger sums in other schemes.
Q: Does inflation affect compound interest?
Yes, inflation reduces the real value of returns, so consider inflation-adjusted returns.
Q: Can I reinvest the interest?
Yes, reinvesting compounds the growth, boosting returns over time.
Q: Is compound interest better than simple interest?
For long-term goals, yes, as it generates higher returns through interest accumulation.