Compound Interest Calculator

Important note

The result is in nominal dollars — inflation is not subtracted. At 2% annual inflation, a dollar 20 years from now buys about 67 cents of today’s goods, so the $300,850.72 in the worked example below is worth roughly $202,464 in today’s purchasing power, and a 7% nominal return is really about a 4.90% “real” return after inflation. When you judge whether a projection is enough, judge it in today’s dollars.

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How this compound interest calculator works

This calculator converts your nominal annual return into an effective monthly rate using your chosen compounding frequency, then simulates month by month: each month the balance earns interest and your contribution is added. The formula behind it is the standard future-value-of-a-series: FV = P(1+r)^n + PMT × (((1+r)^n − 1) ÷ r), where P is the initial amount, PMT the monthly contribution, r the effective monthly rate and n the number of months. More frequent compounding gives a slightly higher effective rate, which is why monthly beats annual compounding by a small margin at the same nominal rate.

The monthly rate is not simply the annual rate divided by 12: it is derived from your nominal annual rate and compounding frequency as (1 + annual/m)^m/12 − 1, which is why a nominal 6% compounded monthly and the same 6% compounded annually genuinely give different results — exactly as they do at a real bank. The interest figure shown is the ending balance minus total contributions.

A worked example

Start with $10,000, add $500 every month, assume a 7% annual return compounded monthly, and wait 20 years. Your total contributions are $130,000 ($10,000 + $500 × 240 months). Compounding turns that into a future value of about $300,850.72 — meaning roughly $170,850.72 of the final balance is interest earned, more than everything you put in. That gap between contributions and final value is the whole point of starting early: the first dollars you invest do the heaviest lifting. Try dropping the time horizon to 10 years in the form above and watch how much of the growth disappears.

Three tips for using this tool well

• Test a conservative return. A 7% nominal return is a common long-run stock-market assumption, but run 5% too — the difference over 20+ years is dramatic, and planning on the lower number is safer.
• Compare starting now versus waiting. Run your numbers, then run them again with five fewer years. The lost compounding usually dwarfs the contributions you "saved" by waiting.
• Pair it with the account calculators. Growth inside a TFSA or RRSP is tax-sheltered; the same math in a taxable account loses a slice to annual taxes on interest and distributions.