Compound Interest Calculator — See Your Money Grow

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which is calculated only on the principal, compound interest grows exponentially over time because you earn interest on interest. The formula is A = P(1 + r/n)^(nt), where P is the principal, r is the annual rate, n is the compounding frequency, and t is the number of years.

The more frequently interest is compounded, the more total interest you earn. Daily compounding yields slightly more than monthly, which yields more than quarterly, which yields more than annually. For example, Rs. 1,00,000 at 10% for 10 years compounded annually gives Rs. 2,59,374, while daily compounding gives Rs. 2,71,791 — a difference of about Rs. 12,417.

The Rule of 72 is a quick way to estimate how long it takes for an investment to double. Simply divide 72 by the annual interest rate. For example, at 8% interest, your money doubles in approximately 72 / 8 = 9 years. At 12%, it doubles in about 6 years. This rule works well for interest rates between 2% and 20%.

Simple interest is calculated only on the original principal amount, while compound interest is calculated on the principal plus all previously earned interest. For example, Rs. 1,00,000 at 10% for 10 years: simple interest gives Rs. 2,00,000 total, while compound interest (annually) gives Rs. 2,59,374. The longer the time period, the bigger the difference between the two.