Nowadays, planning your finances has become quick and hassle-free – thanks to online calculators. For instance, take the HRA calculation. Instead of manually calculating, you can use an HRA calculator to get the exact figure. Similarly, if you are willing to learn how to put your money to work, you first must understand the working of the power of compounding calculator. It can help you grow your wealth many folds and build a secure future.
What is a Power of Compounding Calculator and Compound Interest?
Essentially, compounding is the ‘increase in the value of an investment, due to the interest earned on the principal, and the accumulated interest.’ Simply put, compounding is a strategy that puts your money at work for you. It is regarded as a powerful tool for wealth creation. You can use the power of compounding to plan your future goals, such as retirement, a child’s higher education and other crucial life goals.
With compound interest, you make interest on the principal amount as well as the accumulated interest amount over consecutive periods. Over time, this interest escalates into a substantial amount.
Now, what is the power of compounding calculator?
The power of compounding calculator is a tool that helps you calculate the value of an investment you make. It calculates the value of the investment after ‘n’ number of years at a fixed interest rate. The power of compounding calculator uses the formula of compound interest as its basis. The whole concept of compound interest revolves around getting high returns by adding the interest earned to the principal amount at the rate of compound interest.
Benefits of a Power of Compounding Calculator
The power of compounding calculator is an easy-to-use online tool. Its benefits are mentioned below:
- Easy to Use
The power of compounding calculator is convenient to use. You have to fill in specific values, i.e. the investment amount, investment period (in years), and expected return (in %). The calculator then displays the values of total investment, wealth created, and maturity value with a graph.
- Makes Calculation Easy and Timesaving
Calculating compound interest on an investment made and determining the final value manually will take up much time. Using the power of compounding calculator gives back accurate results in a few seconds. Hence saves time your precious time.
- Future Planning
The power of compounding calculator helps in successful financial planning. You can take help of the power of compounding calculator to find out how much an investment will reap before making the actual investment. This way, you can compare different investment plans and pick the most profitable option.
- Free of Cost
The calculator is available online and can be used multiple times for free. It helps you plan your cost-effectively and better manage your funds.
- Compare Multiple Scenarios
As an investor, you can use the calculator to run multiple scenarios by trying different interest rates, investment amounts, and the time of investment. You can compare all the results and find out the best plan possible.
How to Use a Power of Compounding Calculator?
As you now know that the power of compounding calculator is easy to use and has many benefits, let us learn how to use it.
Every investment has a principal amount, investment period, and a fixed rate of return fields. These areas need to be filled in by you to check how much you will earn overtime. The power of compounding calculator gives you the total investment, wealth gained, and maturity value in numbers as well as in a graphical format.
To sum it all, the power of compounding calculator displays the maturity value of a lump sum investment at the end of a specified period at a specific rate of return.
The most powerful tool of the universe is time. While you cannot control it, you can undoubtedly leverage time to make your life better. Take long-term financial planning, for example. When you decide to invest in an investment plan that offers compounding returns over time, you can quickly maximise your savings and accomplish your life goals.
If you want to accumulate wealth quickly and take advantage of the magic of compound interest, it’s essential to start early and be consistent.