- What is Compound Interest?
- How is Compound Interest Calculated?
- Why is Compound Interest Important?
- How to Use Our Compound Interest Calculator
- Simple Interest vs. Compound Interest
- How Often is Interest Compounded?
- How Compound Interest Can Work Against You
- What is the Rule of 72?
- What is 12% Compounded Interest?
- How to Make a Compound Interest Calculator in Excel
Ever wondered how your money can grow over time? Whether you're saving for a house, investing for retirement, or comparing loan options, understanding compound interest is essential.
Our Compound Interest Calculator helps you estimate the future value of your savings, investments, or loans instantly—no manual calculations needed!
What is Compound Interest?
Compound interest means earning "interest on interest"—not just on your initial deposit (principal), but also on the interest that builds up over time.
For example, if you deposit ₱100,000 in a bank account with 5% annual interest, compounded yearly:
- Year 1: You earn ₱5,000 (5% of ₱100,000), making your total ₱105,000.
- Year 2: You earn 5% on ₱105,000 (₱5,250), increasing your balance to ₱110,250.
- Year 3 and beyond: Your money keeps growing because interest is added to the new total every year.
This is how compound interest helps grow your wealth exponentially over time!
How is Compound Interest Calculated?
The formula for compound interest is:
A = P (1 + r/n) ^ (nt)
Where:
- A = Final amount after interest
- P = Principal (initial investment)
- r = Annual interest rate (decimal form)
- n = Number of times interest is compounded per year
- t = Number of years
Compound Interest Calculation
You invest ₱500,000 at an 8% annual interest rate, compounded quarterly, for 10 years:
A = 500,000 × (1 + 0.08/4)^(4×10)
A ≈ ₱1,079,000
After 10 years, your money has more than doubled!
Why is Compound Interest Important?
- Faster Wealth Growth: The earlier you start, the bigger your returns—thanks to the power of compounding.
- Ideal for Retirement & Savings: Great for Pag-IBIG MP2, mutual funds, and time deposits.
- Helps Beat Inflation: If inflation is at 6% per year, your savings need to grow at least that much to maintain purchasing power.
- The Snowball Effect: Even small investments grow big over time.
For example
If you invest ₱5,000 per month in a mutual fund with 12% annual returns:
- In 25 years, you'll have ₱3.5 million
- In 35 years, you'll have ₱10 million
Starting 10 years earlier can make millions of pesos in difference!
How to Use Our Compound Interest Calculator
Just enter the following details:
- Initial Investment – Example: ₱500,000
- Annual Interest Rate – Example: 6%
- Compounding Frequency – Daily, Monthly, Quarterly, or Annually
- Investment Duration – Example: 20 years
- Regular Contributions (Optional) – Example: ₱5,000 per month
- Get Instant Results – See how much your investment will grow!
Simple Interest vs. Compound Interest
Simple interest earns interest only on the original amount, while compound interest grows on both the principal and accumulated interest.
| Feature | Simple Interest | Compound Interest |
|---|---|---|
| How It Works | Earns interest only on the principal | Earns interest on principal + accumulated interest |
| Growth Speed | Slower | Faster |
| Example (₱100,000 at 5% for 10 years) | Earns ₱50,000 | Earns ₱62,889 |
If you're saving or investing, compound interest is better. But if you're borrowing, simple interest is cheaper because it doesn’t accumulate on previous interest.
How Often is Interest Compounded?
The more frequently interest is compounded, the faster your money grows.
| Compounding Frequency | Effect on Growth |
|---|---|
| Daily | Fastest Growth |
| Monthly | Slower than daily but strong |
| Quarterly | Moderate growth |
| Annually | Slowest growth |
For example, a 12% annual interest compounded monthly will give higher returns than 12% compounded annually.
How Compound Interest Can Work Against You
While compound interest helps grow savings, it can also increase debt—especially on credit cards and loans.
If you owe ₱50,000 on a credit card at 20% interest, compounded monthly, and only make minimum payments:
- You could end up paying hundreds of thousands in extra interest over time!
Expert advice
Always pay more than the minimum to avoid interest piling up.
What is the Rule of 72?
The Rule of 72 helps estimate how long it takes to double your money with compound interest.
Years to Double = 72 ÷ Interest Rate
If you invest at 6% interest, your money will double in 12 years.
What is 12% Compounded Interest?
If you invest ₱100,000 at 12% annual interest, compounded yearly:
| Year | Amount (₱) |
|---|---|
| 1 | 112,000 |
| 2 | 125,440 |
| 3 | 140,493 |
| 4 | 157,352 |
| 5 | 176,239 |
After 5 years, your investment grows to ₱176,239 instead of ₱160,000 with simple interest.
If the same 12% is compounded monthly, your returns will be even higher!
How to Make a Compound Interest Calculator in Excel
Want to calculate compound interest yourself? Here’s how:
Steps:
- Open Microsoft Excel.
- Enter column labels: Principal, Interest Rate, Years, Future Value.
- Use the formula:=P * (1 + (r/n))^(n*t)P = Principalr = Interest Rate (decimal)n = Number of compounding periods per yeart = Number of years
- P = Principal
- r = Interest Rate (decimal)
- n = Number of compounding periods per year
- t = Number of years
- Create a Growth Table to track how money grows annually.
- Use a Chart to visualize your investment’s growth.
Or, for instant results, try our Philippines Compound Interest Calculator!
Compound interest is one of the most powerful financial tools—it can help you grow wealth or accumulate debt. The earlier you start investing, the more benefits you get.
Expert advice
- Start investing early to maximize compounding.
- Use investments like mutual funds, time deposits, and stocks for long-term growth.
- Avoid debt with high compound interest, such as credit cards.
Ready to grow your wealth? Try our Philippines Compound Interest Calculator today!
