How to use this compound interest calculator
- Enter your initial investment (the lump sum you start with).
- Enter a monthly contribution (set to 0 if you're only investing once).
- Set the annual interest rate you expect to earn.
- Choose the time period and compounding frequency.
- View your future value, total invested, and total interest earned instantly.
What is compound interest?
Compound interest is interest earned on both your original principal and the interest that has already been added to it. This creates an exponential growth effect — your money earns interest on interest.
Albert Einstein reportedly called it "the eighth wonder of the world." Whether the attribution is accurate or not, the math is real: small, consistent investments compounded over long periods can grow to surprisingly large amounts.
Compound interest formula
Where P = initial principal, C = periodic contribution (per compounding period), r = annual rate (decimal), n = compounding frequency per year, t = time in years.
The Rule of 72
A quick way to estimate how long it takes to double your money: divide 72 by your annual interest rate.
| Rate | Years to double |
|---|---|
| 6% | 12 years |
| 8% | 9 years |
| 10% | 7.2 years |
| 12% | 6 years |
| 15% | 4.8 years |
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal: I = P × r × t. Compound interest is calculated on the principal plus accumulated interest. Over time, compound interest grows much faster — a ₹1 lakh investment at 10% becomes ₹1.5 lakh after 5 years with simple interest, but ₹1.61 lakh with annual compounding.
Does compounding frequency make a big difference?
The effect is modest but real. ₹1 lakh at 10% for 10 years yields ₹2,59,374 with annual compounding vs ₹2,70,704 with monthly compounding — a difference of ₹11,330. The gap grows larger with higher rates and longer periods.
How do monthly contributions affect the result?
Monthly contributions have a dramatic effect. ₹1 lakh invested once at 10% for 20 years becomes ₹6.73 lakh. But ₹1 lakh plus ₹5,000/month at 10% for 20 years grows to ₹44.6 lakh — because each contribution compounds for its remaining time.
What real-world investments offer compound interest?
Fixed deposits, recurring deposits, PPF, debt mutual funds, and savings accounts all compound. Equity mutual funds and stocks don't technically "compound" interest, but their returns reinvested produce a similar exponential growth effect.