Compound Interest Calculator

The Compound Interest Calculator at SchoolMyKids is a simple yet powerful tool designed to show you how your savings or investments can grow over time. With this calculator, you can easily find out how much your money will be worth in the future by entering just a few details. 

What is a Compound Interest Calculator? 

The Compound Interest Calculator helps you find out how much your money can grow over time when you earn interest not just on your original amount (the principal) but also on the interest that gets added each year. This is called “compound interest,” and it’s a powerful way to build your savings or investments. 

Understanding Key Terms 

Before using the calculator, let's understand the important terms: 

• Principal Amount: This is the initial amount of money you invest or deposit. It's your starting point - the foundation upon which compound interest builds. 
• Interest Rate: This is the percentage rate at which your money grows each year. For example, if you have a 5% annual interest rate, your money grows by 5% each year. This rate is usually expressed as an annual percentage. 
• Time Period: This is how long you plan to keep your money invested, measured in years. The longer the time period, the more compound interest can work its magic. 
• Compound Interest: This is the interest earned not only on your original principal amount but also on the interest that has been added to your account in previous periods. It's interest earned on interest. 
• Final Balance: This is the total amount you'll have at the end of the investment period, including both your original principal and all the compound interest earned. 

How to Use the Compound Interest Calculator 

Using our calculator is straightforward. Follow these simple steps: 

Step 1: Choose your preferred currency from the dropdown menu (Dollar, Rupee, Pounds, or Euro). 

Step 2: Enter the principal amount - this is how much money you're starting with or planning to invest. 

Step 3: Input the annual interest rate as a percentage. For example, if your investment offers 8% annual returns, enter 8. 

Step 4: Specify the time period in years. This is how long you plan to keep your money invested. 

Step 5: Click the calculate button to see your results. 

Understanding Results 

After you calculate, you’ll see: 

• Your Final Balance: The total amount you’ll have at the end of the period. 

• Your Compound Interest: The total interest earned over the entire period. 

How Do I Calculate Compound Interest? 

The calculator uses this formula: 

A = P x (1+r)^t

Where: 

• A = Final balance (principal + interest) 

• P = Principal (starting amount) 

• r = Annual interest rate (as a decimal, so 5% = 0.05) 

• t = Time in years 

To find the compound interest earned: 

Compound Interest = A - P

Example Calculation 

Suppose you invest ₹10,000 for 3 years at an annual interest rate of 5%. 

• Amount (P): ₹10,000 

• Time (t): 3 years 

• Interest rate (r): 5% per year (0.05 as a decimal) 

Plug into the formula: 

A= 10,000×1.157625=₹11,576.25 

Compound Interest=₹11,576.25−₹10,000=₹1,576.25 

So, after 3 years, your final balance will be ₹11,576.25, and you will have earned ₹1,576.25 in compound interest. 

Common FAQs 

What is compound interest?

Compound interest is interest calculated on both your original amount and the interest that has been added to it over time. 

How is compound interest different from simple interest?

Simple interest is only calculated on your original amount, while compound interest is calculated on your original amount plus any interest already earned. 

Does the frequency of compounding matter?

Yes, the more often interest is added (compounded), the faster your money grows. This calculator uses annual compounding for simplicity. 

Use SMK's Compound Interest Calculator to explore how your savings can grow and to make smart, informed choices about your financial future!