Compound interest
What a lump sum becomes when interest earns interest — against simple interest, and with a monthly addition.
Simple interest on रू 1,00,000 at 10.00% for 10 years gives रू 2,00,000. Compounded Yearly, the interest itself earns interest, and it gives रू 2,59,374.25 — रू 59,374.25 more for doing nothing but waiting.
The frequency matters less than people expect; the rate and the years matter far more. Try 15 years instead of 10 and watch the last five do the most.
| Year | Value | Put in so far |
|---|---|---|
| 1 | 1,10,000 | 1,00,000 |
| 2 | 1,21,000 | 1,00,000 |
| 3 | 1,33,100 | 1,00,000 |
| 4 | 1,46,410 | 1,00,000 |
| 5 | 1,61,051 | 1,00,000 |
| 6 | 1,77,156.10 | 1,00,000 |
| 7 | 1,94,871.71 | 1,00,000 |
| 8 | 2,14,358.88 | 1,00,000 |
| 9 | 2,35,794.77 | 1,00,000 |
| 10 | 2,59,374.25 | 1,00,000 |
- Ask your bank two things: the rate, and how often it is added. The first matters ten times more.
- Put the same numbers into the SIP calculator to see monthly investing against a lump sum.
- The rate stays 10.00% for all 10 years — savings rates change, and investments are not guaranteed.
- Interest is added Yearly and left in; monthly additions arrive at month-end and compound monthly.
- No tax on interest, no fees, no withdrawals.
- Inflation is not modelled — the figure is in today's rupees only in name.
A worked example
The form starts with these figures (in NPR) so you can see how it works before typing your own. They are made up — nobody's real numbers appear here.
Questions people ask
What is compound interest?
Interest that is added to the balance and then earns interest itself. Simple interest is paid only on the original amount. Over ten years the gap is large; over thirty it is most of the money.
Does monthly compounding beat yearly by much?
Less than people expect — a few percent of the final figure at typical rates. The rate and the number of years are what matter. Try them and see.
What is the rule of 72?
Divide 72 by the rate to get roughly the years it takes money to double: 72 ÷ 10 ≈ 7 years. The page shows the exact figure beside it.
Why does the warning appear above 12%?
Because a savings account pays far less, and anything paying more than that for many years running is an investment with risk, not a guarantee. The arithmetic is right; the assumption may not be.
Do you keep what I type here?
No. The figures are used to work out the answer and are not stored, and never appear in the page address.
These are estimates. The figures depend entirely on the numbers you enter and on assumptions that are listed on every result. They are not financial advice, and a bank, employer or authority may use different rules. Check anything important with them before you decide.
We do not keep your figures. Salary, debt and savings you type here are used to work out the answer and are not stored, and never appear in the page address. The only thing remembered is your country and language choice (a small cookie), so the currency can be suggested next time — never a figure you typed. Anonymous counters record that a calculation happened, not what it was.