Watch your money grow – calculate compound interest on any investment
Albert Einstein reportedly called compound interest the "eighth wonder of the world." Unlike simple interest (where interest is only earned on your principal), compound interest earns interest on interest — meaning your money grows exponentially over time, not linearly.
The longer your money stays invested, the more powerful compounding becomes. This is why starting to invest early — even with small amounts — beats investing larger amounts later. The key variables are: principal, interest rate, compounding frequency, and time.
A quick mental shortcut: divide 72 by the interest rate to find how many years it takes to double your money. At 8% per year, money doubles every 72 ÷ 8 = 9 years. At 12%, it doubles in just 6 years.
Simple Interest: 1,00,000 + (1,00,000 × 10% × 20) = ₹3,00,000
Compound Interest (Annual): 1,00,000 × (1.10)^20 = ₹6,72,750
Compound Interest (Monthly): 1,00,000 × (1 + 0.10/12)^240 = ₹7,32,814
✅ Monthly compounding earns ₹60,064 more than annual compounding!
The more frequently compounding occurs, the higher your returns. Daily > Monthly > Quarterly > Annually. However, the difference diminishes at higher frequencies. For practical purposes, monthly and quarterly compounding (used by most Indian banks for FDs) give significantly better returns than annual.
This calculator shows returns on a lump sum investment with compound interest. SIP (Systematic Investment Plan) involves regular monthly investments and uses CAGR (Compound Annual Growth Rate) for return calculation. Mutual funds don't guarantee a fixed rate — returns vary with market performance. Use our Investment Calculator for SIP projections.
Yes, compounding works against you in debt. Credit cards compound interest daily or monthly on unpaid balances, which is why carrying a credit card balance for years can lead to paying multiple times the original amount. Always clear credit card dues in full to avoid compound debt trap.