About the Compound Interest Calculator
Compound interest means you earn interest on your interest, so money grows faster the longer it is left alone. This calculator shows the future value of a single deposit.
Change the rate, the number of years or how often interest is added to see how each one affects the final amount.
How to use it
- Enter the starting amount.
- Enter the yearly interest rate.
- Enter the number of years.
- Choose how often interest is compounded and press Calculate.
Formula
Future value = P × (1 + r ÷ n)^(n × t), where P is the starting amount, r is the yearly rate as a decimal, n is compounding periods per year and t is years.
Example
1,000 at 5% compounded monthly for 10 years grows to about 1,647.01, so the interest earned is about 647.01.
Common mistakes to avoid
A common mistake is assuming simple interest. Simple interest is calculated only on the original amount, while compound interest also earns interest on interest already added. Check which method your account or investment uses.
Confusing the stated annual rate with the effective yearly return is another error. When interest is compounded monthly, the effective yearly return is higher than the stated rate, so check how often interest is added.
Step by step example and why time matters
Take an amount of 10,000 earning 12% a year, compounded yearly. After one year it becomes 11,200. In the second year the 12% applies to 11,200, not to the original 10,000, so the balance becomes 12,544. The difference looks small at first, but it grows noticeably over long periods.
Compound growth is slow at first and faster over time. Starting a few years earlier often matters more than investing a larger amount later. The calculator assumes a fixed rate for the whole period, so treat the result as an illustration rather than a promise.
Compounding in real life
Bank fixed deposits, PPF, recurring deposits and mutual fund returns all grow through compounding. The longer the money stays invested, the more of the final amount comes from interest earned on earlier interest. The chart above shows this clearly: the interest part is small at first and grows faster every year.
For monthly investments use the SIP Calculator, and for bank deposits with quarterly compounding use the FD Calculator.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the original amount. Compound interest is also paid on interest already earned, so it grows faster.
Does compounding more often make a big difference?
It helps a little. Moving from yearly to monthly compounding raises the result slightly; the rate and the time invested matter much more.
What is the rule of 72?
A quick estimate: divide 72 by the yearly rate to get roughly how many years it takes to double. At 6%, about 12 years.
Are taxes and inflation included?
No. Real returns may be lower after taxes, fees and inflation.