Compound Interest Calculator

How compound interest works

Albert Einstein allegedly called compound interest "the eighth wonder of the world." Whether he said it or not, the math is compelling: at 10% annual interest compounded monthly, ₹1 lakh doubles in roughly 7 years and grows to nearly ₹17 lakhs in 30 years — all without adding a single rupee.

The key insight is that each period's interest becomes part of the principal for the next period. Over decades, this snowball effect becomes dramatic.

Compounding frequency matters

The more frequently interest compounds, the higher your effective yield. Most savings accounts and FDs in India compound quarterly or monthly. PPF compounds annually. US savings accounts often compound daily.

• Daily — highest effective yield
• Monthly — common for savings accounts and home loans
• Quarterly — common for Indian FDs
• Annually — simplest; PPF, NSC

Using this calculator for FD planning

Enter your deposit amount as principal, the FD interest rate, the term in years, and select "Quarterly" for most Indian banks. The result is your maturity amount. Toggle the year-by-year table to see how your corpus grows over time.

The Rule of 72 — a mental shortcut

The Rule of 72 is a quick way to estimate how long it takes money to double: divide 72 by the annual interest rate. At 8% per year, your money doubles in approximately 9 years (72 ÷ 8 = 9). At 12%, it doubles in 6 years. This approximation works well for rates between 6% and 20%.

The rule also works in reverse: if you want your money to double in 10 years, you need approximately a 7.2% annual return. This is useful for setting realistic expectations for FD ladders, debt mutual funds, and equity investments.

Inflation and real returns

Nominal return is the stated interest rate. Real return is what you actually gain after inflation. If your FD earns 7% and inflation runs at 5%, your real return is only about 2%. Over a 10-year horizon, a ₹1 lakh deposit growing at 7% reaches ₹1.97 lakh — but in today's purchasing power it may only be worth ₹1.21 lakh. For long-term wealth creation, consider assets that historically outpace inflation by a wider margin, such as equity index funds.