When we save money, we want it to accumulate over time. Calculating your savings with a compound interest calculator is an effective method to get an estimate of the wealth creation. This calculator illustrates how much your savings can grow if left for a few months or several years. It calculates how much your money has grown through the application of compound interest, which is interest earned on the original amount and the interest already accumulated.
With this compound interest calculator, you will need to provide a few basic points about your savings, including how much you are saving, how long you want to save, and the calculator will show you your final amount. For instance, a term insurance calculator estimates and assists easier understanding of your premium, and a compound interest calculator allows you to plan your savings future with ease.
What Is Compound Interest?
Compound interest means you earn money not just on what you save but also on the interest that gets added over time. Think of it like this: if you save ₹1,000 and earn 10% interest, you get ₹100 in the first year. In the second year, you will get interest on ₹1,100. So, your money grows every year.
How Does a Compound Interest Calculator Help?
A compound interest calculator is a simple online tool. It tells you how much your money can grow in a few years. You only need to fill in:
The amount you want to invest (monthly, quarterly, yearly, etc.)
The number of years you want to invest
Expected rate of returns
Steps to Use a Compound Interest Calculator Online
Step 1: Enter the Amount You Want to Save
This is the money you will start with. For example, ₹10,000.
Step 2: Choose the Period
This is how long you plan to keep your money saved. For example, 5 years.
Step 2: Add the Rate of Interest
This is the percentage you expect to earn. For example, 7% annually.
Step 4: Get Your Results
Once you fill in all the details, the calculator shows the final amount. It also shows the total interest earned.
Example of Compound Interest Calculation
Let’s say you save ₹50,000 for 5 years with a 10% annual interest rate. Your interest is added yearly.
Here’s what happens:
Year 1: ₹50,000 + ₹5,000 = ₹55,000
Year 2: ₹55,000 + ₹5,500 = ₹60,500
Year 3: ₹60,500 + ₹6,050 = ₹66,550
Year 4: ₹66,550 + ₹6,655 = ₹73,205
Year 5: ₹73,205 + ₹7,320 = ₹80,525
After 5 years, your ₹50,000 grows to ₹80,525 without adding anything more. This is the power of compound interest.
Compound Interest Calculator vs Term Insurance Calculator
Both calculators help you plan better, but they have different uses: