Compound interest calculator Canada

Compound interest is interest earned on both your original money and on the interest it has already earned. Instead of growing in a straight line, your balance grows faster and faster over time because each year's growth becomes part of the base that earns the next year's growth. Albert Einstein is often quoted calling it the eighth wonder of the world — over decades it does most of the heavy lifting in building wealth.

You enter a starting amount, a regular contribution (monthly or yearly), an expected annual return, the number of years, and how often interest compounds. The calculator grows your balance month by month, adds your contributions, and shows the future value, how much you contributed, and how much is pure compound interest — plus a year-by-year table so you can see the curve steepen.

It depends on what you hold. A balanced portfolio of stocks and bonds has historically returned roughly 5–7% a year before inflation over the long run; an all-equity portfolio more, with bigger swings. GICs and high-interest savings pay less. For a long-term plan, many Canadians model 6% and then check a more conservative number like 4–5%. Remember returns are never smooth — this is a straight-line estimate, not a guarantee.

More frequent compounding earns slightly more, but the difference is small. At 6%, compounding monthly instead of annually adds only about a sixth of a percent to your effective yearly return; daily barely moves it further. What matters far more than compounding frequency is your rate, how much you contribute, and — above all — how many years you let it run.

Because compounding rewards time more than amount. The earliest dollars you invest have the longest to grow, so they multiply the most. Someone who invests for 30 years often ends up far ahead of someone who invests twice as much for only 15 years. A 25-year-old contributing modestly can beat a 40-year-old contributing aggressively. The single most powerful lever in this calculator is the number of years.

The Rule of 72 is a quick shortcut: divide 72 by your annual return to estimate how many years it takes your money to double. At 6% that's about 12 years; at 8%, about 9 years; at 4%, about 18. It's not exact, but it's a handy way to feel the power of compounding without a calculator — and to see why a slightly higher return, or a few more years, makes a big difference.

No — this is a simple before-inflation, before-tax, before-fee projection. Real returns are eroded by inflation (roughly 2–3% a year), by tax in non-registered accounts, and by investment fees like a fund's MER. To see your money in today's dollars, use a lower "real" return. Our investment fee calculator shows just how much a 1–2% MER quietly subtracts from results like these.

Sheltering matters. Inside a TFSA all growth is tax-free; inside an RRSP it's tax-deferred. In a non-registered account you pay tax on interest, dividends, and realized gains along the way, which drags on compounding. For most Canadians the order is TFSA first, then RRSP, then non-registered — see our TFSA vs RRSP guide to decide what fits your bracket.

If your income rises, increasing your contributions even a little each year compounds powerfully. The contribution step-up in Advanced options models this: set it to the raise you expect (say 2–3% a year) and your contribution grows automatically. Because each larger contribution still has years to compound, a modest annual step-up can add a surprising amount to your final balance versus a flat contribution.

A balance decades from now will not buy as much as the same number does today, because of inflation. The “Today's dollars” toggle discounts your future balance by the inflation rate you set, showing roughly what it would buy in current money. It's the more honest way to judge a long-term plan: a $390,000 future balance might be worth closer to $210,000 in today's purchasing power at 2.5% inflation over 25 years.

Because real returns are never the same every year. The return range in Advanced options runs the projection at a lower and a higher rate as well as your expected rate, and shades the gap as a band on the chart. It's a reminder that any single number is just the middle of a wide cone of outcomes — the further out you look, the wider that band becomes.