Compound Interest Calculator – Watch Your Money Grow
They say money doesn't grow on trees, but with compound interest, it comes pretty close. It is the financial force that turns modest savings into a mountain of wealth over time.
Our Compound Interest Calculator lets you visualize this growth. Whether you are saving for retirement, a child's education, or just a rainy day, use this tool to see how your money can work harder for you than you do for it.
Simple vs. Compound: The Difference
Understanding the mechanics of interest is the first step to financial literacy.
Simple Interest
You earn interest only on the money you initially deposited. It's linear and predictable, but slow.
Compound Interest
You earn interest on your deposit AND on the interest you've already earned. It's exponential and accelerates over time.
Time is Key
The longer you leave your money untouched, the more dramatic the compounding effect. The last few years generate the most wealth.
Consistency
Adding small amounts regularly (like in an SIP) supercharges the compounding process.
Frequently Asked Questions (FAQs)
What is the formula for compound interest?
The formula is A = P (1 + r/n)^(nt).
A = Final Amount, P = Principal, r = Annual Interest Rate, n = Number of times interest is compounded per year, t = Number of years.
How can I maximize compound interest?
Three rules: 1. Start as early as possible. 2. Invest regularly. 3. Do not withdraw the interest; let it reinvest.
What is the difference between APY and APR?
APR (Annual Percentage Rate) is the simple interest rate. APY (Annual Percentage Yield) takes compounding into account. APY is always higher than APR if compounding happens more than once a year.
Does the stock market use compound interest?
Technically, stocks grow through capital appreciation and dividends. However, the concept is the same: if a stock grows 10% this year, next year's 10% growth is on the new, higher price. This is effectively compounding.
How often do banks compound interest?
Savings accounts usually compound interest quarterly or half-yearly. Fixed Deposits (FDs) in India typically compound quarterly.