Finance

Compound Interest Calculator

Calculate how your money grows with compound interest. Model lump sum investments, regular monthly contributions (SIP), or both combined. See the total invested, total interest earned, and final value. The inflation-adjusted option shows your real return in today's purchasing power. Perfect for retirement planning, investment comparison, and understanding the time value of money.

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What does this tool do?

The Compound Interest Calculator projects investment growth over time using the compound interest formula: A = P(1 + r/n)^(nt). It handles three scenarios: lump sum (single principal amount), regular contributions (monthly SIP), or both together. You set the principal, contribution amount, interest rate, compounding frequency (yearly, half-yearly, quarterly, monthly, daily), and time period. The tool shows total amount, total contributions, and interest earned. The inflation adjustment option calculates the real value of your future money in today's purchasing power.

How it works

The calculator uses financial mathematics formulas. For lump sum with periodic compounding: A = P(1 + r/n)^(nt) where P is principal, r is annual rate, n is compounding periods per year, t is years. For regular contributions (annuity), it uses the future value of series formula. The combined case adds both results. Inflation adjustment applies the Fisher equation approximation: real return ≈ nominal return - inflation rate. Year-by-year breakdown shows cumulative growth. The growth chart visualizes principal vs interest accumulation over time.

Features

Principal + monthly SIP contributions
Compounding frequency: yearly, half-yearly, quarterly, monthly, daily
Real-terms (inflation-adjusted) value
Year-by-year balance table
Visual growth chart (principal vs interest)
Shareable URL with all parameters
Compare different scenarios

How to use

1

Enter principal

Initial lump sum investment, if any. Can be zero for pure SIP calculations.
2

Add monthly contribution (optional)

Monthly investment amount for SIP-style investing. Set to zero for lump sum only.
3

Set rate and tenure

Annual interest rate (expected return), years to grow, and compounding frequency. More frequent compounding yields slightly more.
4

Read the results

Future value, total contributed, total interest earned. Enable inflation adjustment to see real purchasing power.

Common use cases

Retirement planning

Calculate how much your retirement savings will grow by retirement age based on current contributions and expected returns.

Investment comparison

Compare different investment options by plugging in their expected returns to see final values side-by-side.

SIP planning

Model systematic investment plans to see how regular monthly investing grows over 5, 10, or 20 years.

Education goal planning

Calculate how much to save monthly to reach a target amount for children's education or other major expenses.

Tips & best practices

Compound vs simple interest: Simple = interest on principal only. Compound = interest on (principal + accumulated interest). Compound grows exponentially — the 'eighth wonder of the world'
Monthly compounding gives more than yearly at the same rate because interest starts earning interest sooner. At 12%/yr, monthly compounding ≈ 12.68% effective annual rate
For SIP step-up (increasing contributions annually), model each year separately or use the approximate average contribution
Inflation adjustment is crucial — 8% return with 6% inflation is only 2% real growth. Always consider purchasing power

Frequently asked questions

Compound vs simple interest?

Simple: interest only on original principal. Compound: interest on principal PLUS accumulated interest from previous periods. Compound grows much faster over time — exponential vs linear growth.

Why does monthly compounding give more than yearly?

Each compounding period adds interest sooner, which then earns more interest. At 12% nominal yearly, monthly compounding yields ~12.68% effective (EAR). The more frequent the compounding, the higher the effective yield.

Does it support SIP step-up?

Not directly in the current calculator. You can approximate by calculating year by year with increasing contributions, or use an average contribution amount for rough estimates.

How accurate is the inflation adjustment?

It uses the approximate Fisher equation (real ≈ nominal - inflation). This is accurate for low to moderate rates. For precise calculations with high inflation or exact requirements, use detailed financial software.