Compound Interest Calculator

What regular contributions turn into — and what they are worth once inflation is taken out.

Your plan
Each period, chosen below.
How often growth is added to the balance.
Set to zero to hide the real-terms figure.

How this is worked out

The balance you start with grows on its own:

A = P(1 + r/n)^(nt)

where P is the opening balance, r the annual rate, n the compounding periods per year and t the years. Each contribution grows separately from the date it arrives, which is the future value of an annuity:

FV = C · ((1 + i)^m − 1) ÷ i

Rather than applying both formulas and adding them, the calculator walks the balance period by period. That matters when contributions and compounding are on different schedules, which for most Canadian accounts they are.

The real-terms figure divides by (1 + f)^t, turning a future dollar into today's purchasing power. The Bank of Canada targets 2% inflation within a 1–3% band, so 2.5% is a reasonable planning assumption rather than an optimistic one.

A worked example

Starting amount
$10,000
Added each month
$500
Return / term
6.5% over 25 years
Total paid in, including the start
$160,000
Growth on top
$264,980
Final balance
$424,980
In today’s money at 2.5%
$229,230

RRSP and TFSA compound identically — the tax arrives at different times

Inside either account, growth is untaxed while it stays there. This calculator therefore applies to both without modification. What differs is when the government takes its share.

An RRSP contribution is deducted from this year’s taxable income, so a $500 monthly contribution at a 40% marginal rate costs you $300 of take-home pay. Every dollar withdrawn later is taxed as ordinary income. A TFSA is the reverse: funded with money already taxed, and every dollar out is yours, including all the growth.

The general rule is that an RRSP wins if your marginal rate in retirement will be lower than it is now, and a TFSA wins if it will be higher. For someone early in their career or on a modest income, the TFSA is usually the better first move — the deduction is worth little at a low marginal rate, and the contribution room is not consumed permanently.

TFSA room comes back; RRSP room does not

A TFSA withdrawal restores that contribution room on January 1st of the following year. An RRSP withdrawal is taxed as income and the room is gone for good, apart from the specific Home Buyers’ Plan and Lifelong Learning Plan exceptions.

This asymmetry matters for anything that might be needed before retirement. It is also why re-contributing to a TFSA in the same calendar year you withdrew is one of the most common and most expensive mistakes — the over-contribution penalty is 1% per month on the excess.

The First Home Savings Account combines the features: deductible going in like an RRSP, tax free coming out like a TFSA, provided the money buys a first home. For anyone eligible it is generally the account to fill first.

The crossover year

The calculator identifies the year in which growth first exceeds everything you have contributed. On the worked example that is year eighteen. Before it, your contributions are doing the work; after it, the account is.

This is why starting matters more than optimising. Ten years of $250 a month started now generally beats fifteen years of $400 a month started in a decade, because the early money has the longest runway. Nothing you can do later replicates time already spent invested.

Fees, and the Canadian mutual fund problem

Canadian mutual funds have historically carried some of the highest management expense ratios in the developed world — 2% or more is still common in bank-sold products. On the projection above, a 2% MER cuts the final balance from $424,980 to $307,236. Nothing else about the plan changed; the fee took $117,000.

Broad-market ETFs are available at under 0.25%, and most discount brokerages now offer commission-free ETF purchases. To model the effect here, subtract the MER from the return: 6.5% less 2% is 4.5%. Run both and look at the difference before deciding it does not matter.

Assumptions and sources

Compounding formula
Standard compound interest with periodic contributions, walked period by period. Verified in tools/test/finance.mjs.
Inflation adjustment
Real value = nominal ÷ (1 + inflation)^years. The Bank of Canada targets 2% within a 1–3% control range.
RRSP / TFSA / FHSA treatment
Growth inside registered accounts is not taxed while it remains there. Contribution room and penalties are set by the CRA and change annually. checked 2026-08
Default return
A conservative long-run real return for a diversified equity portfolio. A default, not advice.
Rates current as of 2026 — verify before relying on this. A steady annual return is an assumption. RRSP, TFSA and FHSA contribution room changes annually — confirm your own limits in CRA My Account.
Questions

What people ask about compounding

RRSP or TFSA first?

If your employer matches RRSP contributions, that first — a match beats any tax argument. After that, a TFSA generally wins at lower marginal rates and an RRSP at higher ones, because the RRSP deduction is worth exactly your marginal rate. If you are eligible for an FHSA and buying a first home, it is usually better than both.

Does this calculator account for tax?

No, and inside an RRSP, TFSA or FHSA it does not need to — growth in those accounts is untaxed while it stays there. In a non-registered account, dividends and realised gains are taxed each year, so real growth would be somewhat lower than shown.

What return should I use?

Something conservative. A diversified equity portfolio has historically returned around 6–7% after inflation over long periods, with wide year-to-year variation. Run 4% as well and check the plan still works.

Why does my bank’s fund not grow like this?

Usually the MER. A 2% management expense ratio removes roughly a quarter of the final balance across twenty-five years. Check the MER of what you hold and subtract it from the return in this calculator to see the actual projection.

What happens if I over-contribute to my TFSA?

A penalty of 1% per month on the excess for every month it stays there. The most common cause is re-contributing a withdrawal in the same calendar year — withdrawn room only returns on January 1st of the following year. Your current room is shown in CRA My Account.

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