CostHonest
Free instant estimates · Ontario market ranges

What will compound interest turn your savings into?

Set a starting amount, a monthly contribution, a rate and a horizon — the calculator compounds it properly (monthly, quarterly, semi-annually or annually) and splits the ending balance into what you deposited and what interest earned. The default inputs — $10,000 to start plus $200 a month at 6% for 20 years — end at $125,510, of which $67,510 is interest. A rule-of-72 note shows how fast money doubles at your rate.

Common questions

How is compound interest different from simple interest?

Simple interest pays only on the original amount; compound interest pays interest on the interest too. At 6%, $10,000 earns a flat $600 a year with simple interest, but with monthly compounding the second year earns on $10,617, the third on $11,272 — the curve keeps steepening the longer you leave it alone.

How much difference does compounding frequency make?

Less than most people expect. $10,000 at 6% for 20 years reaches $33,102 compounded monthly and $32,071 compounded annually — about a 3% gap. The rate and the number of years matter far more than the frequency, which is why the years slider moves the result so much harder than the compounding pills.

What does $200 a month become in 20 years?

At 6% compounded monthly, $200 a month grows to $92,408 on total deposits of $48,000 — the interest earned approaches everything you put in. That is the case for starting early rather than starting big: the first dollars get the most years of compounding.

Does this account for taxes or inflation?

No — it shows the account balance before tax, in future dollars. Inside a TFSA the figure is effectively yours; in a taxable account interest is taxed each year. The investment calculator on this site adds fees and an inflation discount if you want the today's-dollars view.

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