Interest Calculator
Interest Calculator — Simple & Compound Interest
Supports initial investment, periodic contributions, multiple compounding frequencies, tax & inflation
Your results will appear here
Set your investment amount, contributions, rate, and duration on the left, then click Calculate.
Compound vs Simple
Toggle between compound and simple interest to instantly see how compounding frequency dramatically changes your returns over time.
Contributions Modelling
Add annual and monthly contributions to model real savings habits. Choose beginning or end-of-period to match your bank's method.
Real Purchasing Power
The inflation-adjusted result shows what your ending balance is truly worth in today's dollars — critical for long-term planning.
Understanding Interest
Simple Interest vs Compound Interest — A Complete Guide
How interest works, the formulas behind the math, and strategies to grow your money faster
Interest is the compensation paid by a borrower to a lender — or earned by a saver from a bank — for the use of money over time, expressed as a percentage of the principal. It is the backbone of virtually every financial instrument in the world, from savings accounts and fixed deposits to bonds, mortgages, and credit cards.
There are two fundamental ways interest accumulates: simple interest, which is calculated only on the original principal, and compound interest, which is calculated on the principal plus all previously earned interest. The difference between the two grows dramatically over long time horizons — a phenomenon often called the power of compounding.
Simple interest is straightforward: interest is charged only on the original principal for each period, with no compounding.
Example: $10,000 at 8% for 3 years → Interest = $10,000 × 0.08 × 3 = $2,400
Simple interest is rarely used in real-world savings products but is common in some short-term personal loans and two-wheeler loans in India.
With compound interest, the interest earned each period is added to the principal, and future interest is earned on this larger amount. The more frequently interest compounds, the higher the effective return.
For continuous compounding: A = P × e^(r×t)
The larger your starting investment, the more interest you earn — all else equal. Even modest increases in initial capital compound to large differences over decades.
A higher rate accelerates growth exponentially under compound interest. The Rule of 72 states: divide 72 by the rate to estimate years needed to double your money.
Time is the most powerful variable in compounding. The longer your investment horizon, the more periods interest has to compound upon itself — returns become non-linear.
More frequent compounding — monthly vs. annual — increases effective yield. Daily and continuous compounding yield slightly more than monthly, but the difference is small.