Calculate your Returns
Compound Interest Calculator
My investment
I expect returns up to
Tenure
Suggested Strategy
Total investment
₹ 1,00,000
Estimated Gains
₹ 76,234
If you invest ₹ 1,00,000 today, in 5 years you will get
Future Value
₹ 1,76,234
A compound interest calculator helps you estimate the return on your investments using the principle of compounding interest. It can be used to calculate returns on fixed deposits, recurring deposits, mutual funds, and other compounding financial instruments.
What is Compound Interest?
Compound interest is the amount earned on the initial amount invested plus the interest accumulated over each cycle of compounding. In simple terms, it is interest earned on interest. The rate at which your investment grows is directly proportional to the time you allow the compounding. The longer you stay invested, the more your money grows, as compounding builds steadily with each cycle.
How Does Compound Interest Work?
Compound interest works on the principle of growth over time. Unlike simple interest, where interest is earned only on the initial investment, compound interest allows the interest earned to be reinvested, leading to higher returns with each cycle. Here is how it works:
- Initial Investment : The initial amount invested is known as the principal amount. All future calculations are based on this starting figure.
- First interest :The initial investment, or the principal amount, earns interest over time, which is known as the first amount of interest.
- Subsequent principal : The new principal amount for the next compounding cycle will include the principal investment and the interest accrued. This new total becomes the principal for the next cycle of compounding.
- Continuous increment of the principal : With every cycle, the principal grows as previous interest earnings are added. This continuous reinvestment leads to accelerated growth, making compound interest a powerful wealth-building tool.
How to Calculate Compound Interest?
The formula to calculate compound interest is A = P (1+r/n) t
where,
A = Future value of the investment
P = Principal amount invested
r = The rate of interest (decimals)
n = Number of times interest gets compounded per period
t = Number of periods the money is invested for
Let us take an example to calculate this.
Raju has invested Rs. 10,000 for 10 years. The interest rate earned for the investment is 5%.
In the first year, Raju will earn Rs. 500 as his interest on the invested principal of Rs. 10,000.
In the second year, the principal amount on which the interest will be calculated is the original principal invested plus the interest accumulated to date.
Therefore, the new principal amount will be Rs. 10,500, and the interest amount will be Rs. 525.
Subsequently, in the third year, the total principal will be 10,500 + 525 = 11,025
To arrive at the amount that Raju will receive at the end of the tenure or in the 10th year, we can directly place values in the abovementioned formula.
P = INR 10,000
r = 0.05
n = 1
t = 10
A = 10000 (1 + 0.05/1)10 = INR 16,288.95
Thus, the total interest Raju earn at the end of the 10th year is Rs. 16,288.95.
How to Use the Compound Interest Calculator by Tata Moneyfy
To use the compounding interest calculator, visit the Tata Moneyfy Compound Interest Calculator page.
Type an investment amount, which will be your principal amount. Let us assume this to be Rs. 1,00,000. Next, set the expected rate of return; we’ll take 5% for this illustration. Choose your investment duration in months or years. We choose 10 years for this example.
The total estimated gains on Rs. 1,00,000 over 10 years at a 5% interest rate would be Rs. 62,889, making your total maturity amount of Rs. 1,62,889.
Benefits of using Moneyfy’s compound interest rate calculator
Moneyfy offers you an online compound interest rate calculator that offers you results instantly. Here are the benefits of this calculator:
1. Easy-to-Use and free
2. Reliable and accurate
3. Keeps your data secure
Apart from the compound interest rate calculator, Moneyfy also offers other calculators, such as an Equal Monthly Instalment (EMI) calculator, a Systematic Investment Plan (SIP) calculator, and a retirement calculator.
How can a Compound Interest Calculator beneficial for You?
Here are the benefits of using a compound interest calculator:
1. It helps you calculate the accurate amount and percentage of your returns over a specific period of time.
2. It helps you ascertain how much you must invest over a specific period of time so that your desired corpus can be attained comfortably.
3. Moneyfy offers a customisable compound interest calculator which allows you to assign values to key factors depending on your needs.
4. It helps you calculate the total returns and annual returns in case you need to consider breaking the investment in the future. For accurate calculations, it's best to factor in pre-closure charges.
5. The Indian Government has annualised the interest rates on national Savings Certificates to streamline the deposit rates. These changes came into effect in 2016. It's best to use a reliable online compound interest calculator like Moneyfy’s to determine how well your savings schemes work now.
FAQs
View AllWhat is the power of compounding?
The power of compounding is the number of times the interest earnings are reinvested (or compounded) at the existing rate of interest. It determines the times your interest amount is multiplied in the investment.
What is the difference between simple interest and compound interest?
While simple interest calculates interest on the principal part solely, compound interest calculates interest on the principal amount and the accumulated interest together.
Is compound interest better than simple interest?
Yes, compound interest is better than simple interest as it helps you earn a higher return on your investments.
Compounding monthly or quarterly. What should I choose?
You should choose to compound monthly over quarterly. This is because the higher the number of times interest is compounded, the higher the return on your investment.
What is the power of compounding in investing?
When you invest your funds in any scheme, the money grows at the interest rate applicable to the investment instrument. For instance, say you invest in a 5-year FD at 8% p.a. at quarterly compound interest formula.
Here using the power of the compounding calculator, the power of compounding will be 5 for the annual returns and 4 given quarterly reinvested returns. In total, the initial investment will earn 20 times the compound interest in 5 years.
What will Rs. 25,000 be worth in 20 years?
The rise in prices of general commodities is known as inflation which causes the value of money to decline gradually over a period. So, say the annual inflation rate stands at an average of 5% p.a., then Rs. 25,000 will be worth Rs. 9422 in 20 years.
How often is interest compounded?
When you choose to make the investment on compound interest, you can also choose how often this interest is compounded. Here are the various ways of compounding interest-
- Annually- The compound interest is calculated once a year
- Half-Yearly- Interest is determined twice a year
- Quarterly- It follows the quarterly compound interest formula, and the interest is calculated every three months
- Monthly- The interest is calculated and reinvested every month by using the monthly compound interest formula
- Daily- Interest is calculated using a daily compound interest calculator and reinvested every day
You can use Tata Capital's compound return calculator to calculate compound interest online.
What is daily, monthly, and yearly compounding?
The compound interest on your investment can be compounded in a number of ways. You can use a simple compound interest calculator to get an accurate estimate of your expected returns.
- Daily compounding
In daily compounding, the interest earnings are calculated and reinvested every day.
- Monthly compounding
Here, the compound interest is calculated every month and reinvested the next month. You can use a compound interest calculator to plan your investments.
- Yearly compounding
The interest is calculated year on year, and the final amount is reinvested in the next year till the investment period.
Is it better to compound daily or monthly?
If you're looking to maximise the return on your investment, daily compounding can offer you better returns. As more compounding results in a higher power of compounding, the higher will be the returns from your compound interest.
Use an online compound interest calculator to calculate compound interest online.
What is the advantage of compound interest?
Looking to secure your child's future? Or want to save up enough for your retirement? Choose an investment option with compound interest. It has the potential to grow your funds substantially over a period as it lets you add interest on your interest.
The longer your funds stay invested at compound interest, the higher your final returns will be. And to make the most of your investment plans, use a compound interest rate calculator that will calculate the accurate amount of returns you can expect.
You just have to enter the initial investment amount, the rate of interest, and the number of years you want to keep your funds invested in the compound interest calculator.
When is my interest compounded?
Interest is typically compounded at either the tenure's start or end.
Can I include regular withdrawals?
Yes, you can make withdrawals a part of the process, either by withdrawing the entire amount or a percentage of interest earned.
What is the effective annual interest rate?
The effective interest rate is the interest you have earned after accounting for compounding.
What is RoR/TWR?
The Rate of Return (RoR) reflects the percentage return on your investment over the entire investment term, whereas, the Time Weighted Return (TWR) represents the cumulative growth rate of your investment.