Interest Calculator On My Savings

Compound Interest Formula:

\[ A = P \times (1 + \frac{R}{n})^{n \times T} \]

Principal Amount (P):

Annual Interest Rate (R):

Compounding Frequency (n):

Time Period (T):

years

Maturity Amount (A):

Interest Earned:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is Compound Interest?

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It's often referred to as "interest on interest" and can help savings grow at a faster rate compared to simple interest.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + \frac{R}{n})^{n \times T} \]

Where:

\( A \) — Maturity amount (final amount)
\( P \) — Principal amount (initial investment)
\( R \) — Annual interest rate (in decimal form)
\( n \) — Number of times interest is compounded per year
\( T \) — Time the money is invested for (in years)

Explanation: The formula calculates how much your investment will grow when interest is compounded at regular intervals.

3. Importance of Compound Interest

Details: Compound interest is a powerful concept in personal finance that allows your savings to grow exponentially over time. The more frequently interest is compounded, the faster your money grows.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate as a percentage, select compounding frequency, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How does compounding frequency affect my returns?
A: More frequent compounding (e.g., monthly vs. annually) results in higher returns because interest is calculated and added to the principal more often.

Q3: What is the Rule of 72?
A: The Rule of 72 is a simple way to estimate how long it will take for an investment to double: Divide 72 by the annual interest rate.

Q4: Can I use this calculator for different currencies?
A: Yes, the calculator works with any currency as long as you're consistent with the principal amount input.

Q5: Is compound interest always beneficial?
A: While beneficial for savings and investments, compound interest works against you when it comes to debt, causing loans to grow faster if not paid promptly.