Key assumptions
The tool assumes a fixed principal, one stated annual rate, and a stable compounding frequency for the full term. It does not account for taxes, partial withdrawals, or changes in rate midway through the investment.
Compound Interest Calculator
Calculate maturity amount with flexible compounding frequency and inflation adjustment.
Tips for maximizing compound interest
- 1Start early — even a small difference in starting age has a large impact because compounding is exponential over time.
- 2Choose products with more frequent compounding (monthly or quarterly) over annual compounding at the same stated rate.
- 3Reinvest interest and dividends instead of withdrawing — breaking the compounding chain significantly reduces final returns.
- 4Compare the effective annual rate (EAR), not just the stated rate, when choosing between banks or fixed deposits.
- 5For fixed deposits, check if the bank offers cumulative FDs (interest reinvested) versus non-cumulative (interest paid out periodically).
- 6Account for TDS (tax deducted at source) on interest — your actual post-tax compounding rate will be lower than the stated rate.
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What is this?
Compound interest means earning interest on interest — your gains get reinvested and grow the principal. This tool uses the standard compound interest formula with configurable compounding frequency, commonly used for fixed deposits, bonds, or comparing how compounding frequency affects returns.
Formula
A = P(1 + r/n)^(nt), where P is principal, r is the annual interest rate, n is compounding periods per year, and t is years.
How to use
Enter principal amount, annual interest rate, time period, compounding frequency (e.g. 12 for monthly), and optional inflation rate. Compare the maturity amount with the inflation adjusted value.
FAQ
What does compounding frequency mean?
It is how many times per year interest is calculated and added to the principal. 12 means monthly, 4 means quarterly, 1 means annually. More frequent compounding produces a slightly higher maturity amount at the same stated rate.
How is this different from CAGR?
This calculator grows a principal at a stated rate and compounding schedule. CAGR measures the average annual growth between a start and end value — use the CAGR calculator for that.
Why show the inflation adjusted value?
A large maturity amount may buy less than expected after years of inflation. The inflation adjusted value helps you see what that money is actually worth in today's terms.
Does this work for fixed deposits?
Yes, if you match the bank's compounding convention and pre-tax rate. Subtract tax or use an after-tax rate if you need net results.
Can I compare monthly vs annual compounding?
Yes — change the compounding frequency and compare maturity amounts at the same stated annual rate to see the difference.
Deeper guide
Use these notes to stress-test the calculator, understand what drives the result, and choose the right tool for the decision you are making.
Worked example
At the same stated annual rate, monthly compounding will finish slightly above annual compounding because interest gets added back into the base more often. The difference is usually modest in a single year but becomes easier to notice over longer periods.
How to interpret the result
This calculator is especially useful for comparing products that advertise similar rates but compound differently. The inflation-adjusted line helps you separate headline growth from real growth after rising prices.
When to use this vs CAGR
Use Compound Interest when you are projecting forward from a known rate. Use CAGR when you already know the beginning and ending values and want to infer the annualized growth rate that links them.