Try our calculators tool here: Lumpsum Calculator
Check other country compound interest calculators: USA Calculator | UK Calculator | Canada Calculator | Australia Calculator | UAE Calculator | Malaysia Calculator | Germany Calculator | South Africa Calculator | India Calculator

What is Compound Interest?

Compound interest is the interest calculated on both the original principal and the interest that has already been earned. Unlike simple interest, which is calculated only on the initial amount, compound interest allows your savings or investments to grow faster over time because you earn “interest on interest.”

For example, if you invest SGD 10,000 at an annual interest rate of 3%, after one year you will earn SGD 300. In the second year, the 3% interest is calculated on SGD 10,300, giving you SGD 309. Over time, this compounding effect can significantly increase your wealth.

How is Compound Interest Calculated?

The standard formula for calculating compound interest is:

A = P (1 + r/n)^(n*t)

• A = the future value of the investment, including interest
• P = principal investment amount
• r = annual interest rate (in decimal, e.g., 3% = 0.03)
• n = number of times interest is compounded per year
• t = time in years

For example, if you invest SGD 5,000 at a 4% annual interest rate, compounded monthly, for 3 years:

P = SGD 5,000, r = 0.04, n = 12, t = 3

A = 5000 × (1 + 0.04/12)^(12×3) = 5000 × (1.003333)^36 ≈ SGD 5,638.14

This demonstrates how compound interest can make your money grow faster compared to simple interest.

How Investors Use a Compound Interest Calculator

In Singapore, investors often use compound interest calculators to plan their finances and estimate future returns. These calculators simplify the math by letting users input:

• Initial investment amount (principal)
• Annual interest rate
• Compounding frequency (daily, monthly, quarterly, yearly)
• Investment duration (in years)

The calculator then shows the future value of the investment and the total interest earned. Singapore investors use these tools for:

• Retirement planning
• Saving for a home or property
• Building emergency funds
• Comparing savings accounts, fixed deposits, or CPF contributions

Using a compound interest calculator helps investors visualise how starting early and letting their money grow can lead to significant returns. It also highlights the importance of compounding frequency and interest rates on long-term wealth accumulation.

In summary, compound interest is a powerful financial concept. By using a compound interest calculator, Singapore investors can make informed decisions, plan for long-term goals, and maximise their savings efficiently.

Compound Interest — Singapore Audience

1. Compound Interest Formula

A = P × (1 + r/n)^(n×t)

• A = amount (future value) after t years
• P = principal (initial amount invested)
• r = annual nominal interest rate (decimal), e.g. 5% = 0.05
• n = number of compounding periods per year (1 = yearly, 4 = quarterly, 12 = monthly)
• t = time in years

For continuous compounding (theoretical):

A = P × e^(r×t)

2. Formula Explanation — Step by Step

1. Split the annual rate: r/n gives the interest rate for one compounding period (for monthly, divide by 12).
2. Single-period growth factor: 1 + r/n shows how much S$1 becomes after one period.
3. Total periods: n×t is the total number of compounding periods over the whole term.
4. Apply growth repeatedly: Raising (1 + r/n) to the power n×t applies that period growth for every period across the full term.
5. Scale by principal: Multiply by P to find the total amount A after t years.
6. Interest-on-interest: Each period’s interest is added to the balance and itself earns interest in later periods — that is the compounding effect.

Derived values

• Total interest earned: Interest = A − P
• Effective Annual Rate (EAR): EAR = (1 + r/n)^n − 1
• CAGR (annualised return): CAGR = (A / P)^(1/t) − 1

3. Example 1 — Annual Compounding (S$)

Scenario: Invest S$10,000 at 5% per year (r = 0.05), compounded annually (n = 1), for 5 years (t = 5).

1. A = P × (1 + r)^t = 10,000 × (1.05)^5
2. (1.05)^5 = 1.2762815625
3. A = 10,000 × 1.2762815625 ≈ S$12,762.82
4. Total interest = S$12,762.82 − S$10,000 = S$2,762.82

4. Example 2 — Monthly Compounding

Scenario: Invest S$5,000 at 4% per year (r = 0.04), compounded monthly (n = 12), for 3 years (t = 3).

1. Monthly rate = r / n = 0.04 / 12 = 0.0033333333 (≈ 0.3333% per month)
2. Growth factor per month = 1 + r/n = 1.0033333333
3. Number of periods = n × t = 12 × 3 = 36
4. Compound factor = (1.0033333333)^36 ≈ 1.127628
5. A = 5,000 × 1.127628 ≈ S$5,638.14
6. Total interest = S$5,638.14 − S$5,000 = S$638.14
7. EAR = (1 + 0.04/12)^12 − 1 ≈ 4.07%

5. Example 3 — Continuous Compounding (Theoretical)

Scenario: Invest S$8,000 at 3% continuously for 4 years (t = 4).

1. A = P × e^(r×t) = 8,000 × e^(0.03×4) = 8,000 × e^(0.12)
2. e^(0.12) ≈ 1.12749685
3. A ≈ 8,000 × 1.12749685 = S$9,019.97
4. Total interest ≈ S$1,019.97

6. Quick How-to

1. Decide P (principal in S$), r (annual rate in decimal), n (compounding frequency), and t (years).
2. Compute A = P × (1 + r/n)^(n×t) (or A = P × e^(r×t) for continuous).
3. Total interest = A − P. Annualised return (CAGR) = (A / P)^(1/t) − 1 if needed.

Top 10 FAQs — Compound Interest (Singapore Audience)

1. What is compound interest?

Compound interest is interest calculated on both the original principal and on interest that has already been added. Over time your S$ savings grow faster because each period’s interest becomes part of the base for the next period.

2. How is compound interest calculated?

The standard formula is A = P × (1 + r/n)^(n×t), where P = principal, r = annual rate (decimal), n = compounding periods per year, t = years. You can also use a compound interest calculator Singapore to compute values quickly.

3. What inputs do I need for a compound interest calculator?

Most calculators ask for: principal (S$), annual interest rate (%), compounding frequency (yearly, monthly, daily), and time in years. Some Singapore calculators accept extra fields like regular contributions or CPF top-ups.

4. Does compounding frequency matter (monthly vs. yearly)?

Yes — more frequent compounding (monthly or daily) produces a slightly higher effective return than annual compounding at the same nominal rate. Try a compound interest calculator online to compare different frequencies for your S$ amounts.

5. How does compound interest apply to CPF, savings accounts and SRS?

CPF interest and SRS returns compound according to each scheme’s rules. For bank savings and term deposits, interest is usually compounded monthly or quarterly. Use a compound interest calculator S$ to model CPF accumulation, SRS top-ups or savings account scenarios.

6. How do regular contributions affect compounding?

Making monthly or yearly contributions adds to the principal each period, increasing the base that compounds. Many compound interest calculator Singapore tools let you enter recurring deposits to show how contributions boost final value.

7. How do taxes and fees affect compound interest in Singapore?

Interest from most savings accounts and CPF growth is net of Singapore personal income tax for residents; investment fees and product charges reduce net returns. When planning, use a compound interest calculator that allows you to adjust for fees or expected net return.

8. How long do I need to see meaningful compounding effects?

Compounding gains are visible over years — the longer you leave money invested, the stronger the “interest on interest” effect. Even small rate differences compound to big differences over decades; test scenarios with a compound interest calculator Singapore online.

9. Can I compare different products with a compound interest calculator?

Yes — enter the same principal and term with different rates and compounding frequencies to compare term deposits, unit trusts, ETFs or CPF projections. Use a compound interest calculator S$ or compound interest calculator CPF to run side-by-side comparisons.

10. Where can I start if I want to try my own numbers?

Start with your current savings (S$), pick a realistic annual return, choose compounding frequency and a time horizon. Put those figures into a compound interest calculator online or a compound interest calculator Singapore to see future value, total interest earned and effective annual rate.