See exactly how your money grows when interest earns interest. Choose yearly, half-yearly, quarterly or monthly compounding and watch the difference — plus the time your money takes to double.
Where:
A = Final amount (₹)
P = Principal (₹)
r = Annual rate ÷ 100
n = Compounding periods per year (1, 2, 4 or 12)
t = Time in years
Reference: standard compound interest formula used across banking and finance; identical to the method prescribed in NCERT mathematics and RBI deposit calculations.
Simple interest pays you only on your original principal, year after year. Compound interest pays you on the principal plus every rupee of interest already earned. In year one the two look identical. By year ten, on ₹1 lakh at 8%, simple interest has produced ₹80,000 while quarterly compounding has produced ₹1,20,804 — over 50% more, from the exact same rate. The longer the time period, the wider this gap grows, which is why compounding is often called the eighth wonder of the world.
The more often interest is added to the principal, the sooner it starts earning its own interest. At 8% for 10 years on ₹1 lakh: yearly compounding gives ₹2,15,892; half-yearly gives ₹2,19,112; quarterly gives ₹2,20,804; monthly gives ₹2,21,964. The jump from yearly to quarterly is meaningful; beyond monthly the gains become tiny. This is why you should always ask not just "what is the rate?" but "how often does it compound?"
Divide 72 by the annual interest rate to estimate how many years your money takes to double. At 8%, money doubles in roughly 9 years; at 12%, in 6 years; at 6%, in 12 years. The rule also works in reverse for inflation: at 6% inflation, the purchasing power of your cash halves every 12 years — a strong argument against leaving large sums idle in a savings account.
A 25-year-old investing ₹1 lakh at 10% until age 60 ends with about ₹28.1 lakh. A 35-year-old with the same amount and rate ends with about ₹10.8 lakh. The ten-year head start nearly triples the outcome, without investing a single extra rupee. In compounding, the earliest years of waiting do the least work and the final years do the most — so the sooner the clock starts, the better.
The same mathematics that grows investments also grows unpaid debt. Credit card balances in India compound at 36%–42% annually — at 40%, an unpaid balance doubles in under two years. This is why financial planners insist on clearing credit card dues in full every month before making any investment: no legitimate investment reliably beats a 40% compounding cost.
Fixed deposits (quarterly compounding — see our FD calculator), PPF (yearly), savings accounts (quarterly), NSC (yearly), mutual fund growth options (continuous, via NAV), and EMI loans, where interest compounds monthly on the outstanding balance (see the EMI calculator). Understanding one formula unlocks all of them.