Compound Interest Calculator

Calculate your investment growth over time

Unlike simple interest, compound interest multiples savings at a faster speed, so interest keeps accruing on a monthly, quarterly, or yearly basis. It’s a dynamic tool for those planning to grow their wealth significantly, over a period.

In compound interest, the interest is calculated on both the principal amount and the accrued interest. So, the interest that you earn for a period (monthly/quarterly/yearly) is added to the principal amount and this carries forward to the next period.

So, the multiplication of your savings can ultimately help you gain a significant ROI (Return on Investment) over the selected period much faster. It’s more useful for investments made in long-term savings instruments.

But how do you calculate the return on your investment over 20 years? Tough, right? That’s when you need the compound interest calculator.

What is a compound interest calculator?

The compound interest calculator is a powerful tool that helps you to estimate the return value of your investment over a said period. For example, if you have invested an amount of $2000 at a $10 annual interest rate for 20 years. With compound interest, you will earn an interest of $1717.9. So, the final maturity amount would be $2717.91.

Whereas, with simple interest, you would only make $1000 in interest with a total value of $2000. So, that’s a straight increase of 717.91 with compound interest. That sounds like magic, isn’t it?

So, the compound interest calculator works on the original investment amount, the interest rate, and the compounding period to find the final maturity amount. Most calculators show a detailed breakdown of the future value that includes the total interest accrued at the end of the period. This includes the initial deposit amount, the final maturity amount, and/or any withdrawals.

How does compound interest work and what are its benefits?

A compound interest calculator can guide you on how much can you end up earning on regular disciplined investments. However, at the end of the day, it depends on the individual, and how disciplined is he with his investments. So, if you are diligently investing in savings or other asset classes, the compound interest calculator can be a great tool for you to get an idea of the ROI.

At the same time, many people use compound interest calculators to estimate their debt interest and, in such cases, it can be detrimental to you. Therefore, you need to plan your investments and use the calculator for a positive outcome. So, here’s an estimate of how the compound interest calculator can help you grow your funds:

The compound interest calculation starts as soon as you start earning interest.

For example, if you opt for a quarterly return, the first interest earned is after the first 3 months. Once you earn the interest, it’s added to the principal amount (A1). Now, you will earn interest on this output after the next 3 months.
Again, the interest earned after the 2ndquarter will be added to the output amount calculated after the first three months (A2).
Now, you will earn interest on A2 in the 3rd quarter and this will add to A2 to generate A3.
Then, finally, after the last quarter, the final interest earned will be added to A3 to generate A4 and that’s the maturity amount.

You can then either withdraw this amount (minus the government tax), stay invested, or you can choose to re-invest in the same savings or any other financial instruments.

Some of the factors that affect the growth of your savings based on compound interest are the period of your investment and the rate of interest.

So, the longer you stay invested and the better the rate of interest earned, the more substantial growth you can expect.

While the rate of interest depends on the financial institution you choose, the period you choose to stay invested depends on you.

Therefore, it’s important to set your goals in advance, considering your investment capacity and how long can you stay invested, and create a plan for the future. At the same time, make sure you choose the correct financial institution that’s offering the best rate of interest and a comfortable tenure. Make sure to double-check your documents and read the fine print to avoid any discrepancies in the future.

So, the essence of the matter is, that the compound interest calculator can be beneficial to you only if you have the right plan in place and on your discipline.

Comparison between simple interest and compound interest

Simple interest is usually calculated for debts like loans over a fixed period. The compound interest, on the other hand, is used for investments, for example, to calculate interest earned after the investment period is over.

The formula for Simple Interest is as below:

S.I. = (P × R × T)/100

Where,

S.I. = Simple Interest

P = Principal amount

R = Rate of Interest

T = Time period

Simple interest is interest calculated on the principal amount and that’s it. While compound interest is interest earned on the principal amount + the principal amount.
While simple interest yields low returns, with compound interest you can earn a higher interest.
The principal amount stays the same in simple interest. In the case of compound interest, the principal amount changes with each interest earned.
Growth stays the same with principal and interest staying the same. In compound interest, the interest and the principal grow faster with the time period.
In simple interest, the interest is charged on the principal amount only, while in the case of compound interest, the interest is charged on both the principal amount and interest earned.

How to calculate compound interest?

To calculate the compound interest, you must use the below formula:

A = P(1+r/n)^nt

Where,

A = the total return amount you will get after the selected period is over.

P = the principal amount (original amount) invested at the start.

r = the interest rate

n = number of times interest is calculated per quarter/month/year

^ = raised to

t = time of investment/investment period

So, if you want to calculate compound interest annually, you must multiply the initial investment amount by 1 + your yearly interest rate raised by (to the power of) of the time elapsed.

Here’s an example below:

So, if you want to invest an amount of $1000 for a period of 20 years at an annual interest rate of 10%, here’s how it looks:

Initial investment amount (P) = Rs. 1000

Annual interest rate = 10%

Time of investment = 20

And, here’s how it will be calculated:

1000 x (1+10)^20

The final value of the investment amount at a compounding rate would be $3000.

This includes:

Interest Earned = $2,000

Principal Amount = $1,000

Total Value = $3,000

Therefore, to calculate the monthly compound interest rate, you would need to multiply the interest 12 times per year. Here’s what you need to do:

Firstly, you should divide your annual interest rate (up to decimal) by 12 and then add the number 1.

Next, raise the output to the power of time (number of years) and multiply it by 12.

Now, multiply this output with the principal amount (P).

Once you have the output, subtract it from the principal balance to get the interest.

A = P(1 + r/12)^12t

Now, we can proceed to calculate compound interest for a certain number of years.

For example, if you have invested an amount of $1000 in a Fixed Deposit that returns interest

at 10% per year on annual compounding, here’s how much you should earn every year.

Year	Interest calculation	Interest earned per year	Balance at the end of the year
2025	1000x10	100	1100
2026	1100x10	110	1210
2027	1210x10	121	1331
2028	1331x10	133.1	1464.1
2029	1464.1x10	146.41	1610.51
2030	1610.51x10	161.05	1771.56
2031	1771.56x10	177.16	1948.72
2032	1948.72x10	194.87	2143.59
2033	2143.59	214.36	2357.95
2034 (10^th Year)	2357.95x10	235.79	2593.74

So, if you invest $1000 at a fixed interest rate of 10% per annum that’s compounded annually, it will give you a total return of $2594 after 10 years. Therefore, you end up earning a total interest of $1594 that’s an ROI of 159% on $1000 (original investment amount).

However, this was a fairly easy calculation considering that you invest in a Fixed Deposit or Savings account with a fixed interest rate. If you invest your finances in mutual funds or other non-traditional instruments, the return on investment will fluctuate based on market conditions. Non-traditional investments are based on market risks and hence, the compounding would vary depending on the several factors related to the market or economy.

Income from added sources

According to investment experts and market gurus, one should not just depend on savings and fixed deposits anymore. If you are aiming for a secure life post-retirement free of financial worries, you should start investing in unconventional instruments. Though the returns are based on market performance and carry a bit of risk, they can truly provide a huge return on investment in comparison to the traditional offerings.

At the same time, you should also consider saving money in a PF account apart from the one that you already get from your workplace. An additional savings of $100 in addition to the $1000 can make a huge difference. So, if your investment amount goes up to $1100 with an annual interest of 10% for 10 years, you end up earning $2853, offering an increased interest earnings of $259.

However, this is a calculation for just 10 years. The sooner you start investing, the more you end up earning in terms of interest. So, if you start investing at the age of 25 and continue with the habit for the next 30 years, your end balance can be as good as $17,449 with a total interest earned of $16, 449.

While compound interest can do magic to your savings over the years with a good saving habit, you must not forget to try out unconventional financial instruments. This can help increase your savings to a larger extent and prepare you to deal with any unexpected expenses or fight any economic adversities in the future.

But, calculating the compound interest may not be easier, especially when you are invested for a longer period. Moreover, if you are investing in all kinds of financial instruments, it can be challenging to keep track of your returns. So, what do you do in such cases? You head over to the search engine and look for a compound interest calculator, right?

How to use our compound interest calculator

Therefore, to help you to easily calculate compound interest on your savings, we have designed this tool, which is available online. It’s completely free and can help you calculate the total return on investment in the blink of an eyelid. All you need to do is enter the principal amount (the amount invested initially), the rate of interest, the compounding frequency (quarterly/monthly/yearly), and the time period.

You will get the total amount earned (end balance) with the bifurcation, that is, the total interest earned for the selected time frame.

Advantages of using our compound interest calculator

Our compound interest calculator is completely free for all users around the year and is available to use online. It’s easy to use and offers the most accurate results up to three decimals. Moreover, all your data shared is completely secured with us and hence, there’s no risk attached.

Best of all, you can use it for all kinds of savings like savings accounts, fixed deposits, mutual funds, SIPs, and more.

Also, there’s no cap on using the calculator, so, you can use it any number of times. Simply bookmark the page for future use and it will be easy to find out.

We also believe in the data privacy of an individual and hence, you can use our calculator without any stress.

That said, you will find many compound interest calculators and they are all useful tools for your future earnings. However, what makes our compound interest calculator stand out is its ease of use and its flexibility. So, start using the compound interest calculator today to reach your financial goals faster with consistent growth and for a secure future.