Monthly Compound Interest Calculator
Calculate compound interest with monthly compounding frequency. Ideal for savings accounts, money market accounts, and monthly dividend reinvestment scenarios.
Understanding Compound Interest
Compound interest is interest calculated on the initial principal plus all accumulated interest from previous periods. It's often called "interest on interest" and causes savings to grow exponentially over time—the key to long-term wealth building.
Compound Interest Formula
A = P(1 + r/n)^(nt)
Where: A = Final amount, P = Principal, r = Annual rate (decimal), n = Compounding frequency per year, t = Time in years.
Example Calculations
| Principal | Rate | Period | Frequency | Amount | Interest |
|---|---|---|---|---|---|
| ₹2,00,000 | 7% | 5 years | Monthly | ₹2,83,359 | ₹83,359 |
| ₹10,00,000 | 9% | 10 years | Monthly | ₹24,59,603 | ₹14,59,603 |
Rule of 72
A quick way to estimate doubling time: divide 72 by the interest rate. At 8%, money doubles in 72/8 = 9 years. At 12%, it doubles in just 6 years. This rule helps in quick mental calculations for investment planning.
Frequently Asked Questions
How is monthly compound interest calculated?
For monthly compounding: A = P(1 + r/12)^(12t). The annual rate is divided by 12 (months), and compounded 12 times per year. This is how most savings accounts calculate interest.
Is monthly compounding better than annual?
Yes, monthly compounding yields slightly higher returns. For ₹1 lakh at 10% for 10 years: Annual = ₹2,59,374, Monthly = ₹2,70,704. The difference grows larger with higher amounts and longer periods.