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Discover the power of compounding. Calculate how your money grows over time with interest on interest.
Total Amount
After 10 years
Principal Amount
Total Interest
Your initial investment of ₹1,00,000 will grow to ₹2,59,374 in 10 years.
Interest makes up 61.4% of your final wealth, demonstrating the power of compounding.
Rule of 72: At 10% interest, your money will double in approximately 720.0 years.
| Year | Principal | Accumulated Interest | Total Balance |
|---|---|---|---|
| Year 1 | ₹1,00,000 | ₹10,000 | ₹1,10,000 |
| Year 2 | ₹1,00,000 | ₹21,000 | ₹1,21,000 |
| Year 3 | ₹1,00,000 | ₹33,100 | ₹1,33,100 |
| Year 4 | ₹1,00,000 | ₹46,410 | ₹1,46,410 |
| Year 5 | ₹1,00,000 | ₹61,051 | ₹1,61,051 |
| Year 6 | ₹1,00,000 | ₹77,156 | ₹1,77,156 |
| Year 7 | ₹1,00,000 | ₹94,872 | ₹1,94,872 |
| Year 8 | ₹1,00,000 | ₹1,14,359 | ₹2,14,359 |
| Year 9 | ₹1,00,000 | ₹1,35,795 | ₹2,35,795 |
| Year 10 | ₹1,00,000 | ₹1,59,374 | ₹2,59,374 |
Albert Einstein famously called compound interest the "eighth wonder of the world." He who understands it, earns it; he who doesn't, pays it.
Unlike simple interest, which is calculated only on the initial principal, compound interest is calculated on the principal plus the accumulated interest of previous periods. It's essentially "interest on interest."
The frequency of compounding plays a significant role in how fast your money grows. The more frequently interest is added to your principal, the faster your wealth accumulates.
An investment compounded monthly will yield a higher final amount than the same investment compounded annually at the same interest rate.
The theoretical limit of compounding frequency is continuous compounding, where interest is calculated and added instantaneously.
Want to know how long it will take to double your money? Divide 72 by your annual interest rate. For example, if you earn 8% interest, your money will double in 9 years (72 ÷ 8 = 9).
Compound interest is the interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan. It's essentially 'interest on interest', which makes your wealth grow at an accelerating rate.
The formula is A = P(1 + r/n)^(nt), where 'A' is the final amount, 'P' is the principal balance, 'r' is the annual interest rate (decimal), 'n' is the number of times interest is compounded per year, and 't' is the number of years.
Compounding frequency is how often the accumulated interest is added to the principal balance. It can be yearly, half-yearly, quarterly, monthly, or even daily. The more frequent the compounding, the higher the final amount.
The Rule of 72 is a quick mental math shortcut to estimate how long it will take for an investment to double. You simply divide 72 by the annual interest rate. For example, at an 8% interest rate, your money will double in approximately 9 years (72 / 8 = 9).
Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal amount AND the accumulated interest of previous periods. Over long periods, compound interest generates significantly more wealth.