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Consistent investments over a number of years can be an effective strategy to accumulate wealth. Even small additions to your savings add up over time. This calculator demonstrates how to put this savings strategy to work for you!
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Definitions
- Opening Balance
- The starting balance or current amount you have invested or saved.
- Additional contributions
- The amount that you plan on adding to your savings or investment each period. The investment period options include monthly, quarterly and annually.
- Years / Months, Weeks etc.
- The total number of years, weeks, months, periods, etc. you are planning to save or invest.
- Rate of return
- The annual rate of return for this investment or savings account. The actual rate of return is largely dependent on the type of investments you select. For example, for the last thirty years the average annual rate of return for the TSX is about 10%. Savings accounts at a bank or credit union may pay as little as 2% or less. It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment.
- Compounding
- This is the frequency that your investment's interest or income is added to your account. The more frequently this occurs, the sooner your accumulated interest income will generate additional interest. For stock and mutual fund investments you should choose 'Annual'. For savings accounts and Term Deposits all of the options are valid, although you will need to check with your financial institution to find out how often interest is being compounded on your particular investment.
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