What is Compound Interest?

Albert Einstein famously called compound interest the "Eighth Wonder of the World." A Compound Interest Calculator helps you estimate how much a lump-sum investment will grow over time when the interest you earn is reinvested to earn even more interest.

Compound vs. Simple Interest

• Simple Interest: You only earn interest on the initial amount you invested (the principal).
• Compound Interest: You earn interest on the principal plus all the accumulated interest from previous years. This creates an exponential "snowball" effect on your wealth.

The Compound Interest Formula

If you want to manually calculate the future value of an investment compounded annually, here is the standard mathematical formula:

Where:
A = Final Amount (Future Value)
P = Principal Amount (Initial Investment)
r = Annual Interest Rate (Decimal)
n = Number of times interest is compounded per year
t = Time in years

Why Business Owners need to understand it

As a shopkeeper, you work incredibly hard for your profits. Instead of letting surplus cash sit idle in a current account, investing it into a Fixed Deposit (FD) or mutual fund allows compounding to grow your wealth passively. Use the Rupaya Khata app to track your shop's profitability, and use this calculator to plan your long-term personal savings goals.