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 and the power of compounding.
Savings Calculator (Canadian)
Note that your investments may be subject to tax if held outside of a registered account such as an RRSP. The cost of tax can reduce your compounded returns. The impact of tax is not considered in this calculation.
Savings Calculator (Canadian) Definitions
- Starting amount
- The starting balance or current amount you have invested or saved.
- Years to save
- The total number years 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. The actual rate of return is largely dependent on the type of investments you select. For example, the annual return of the S&P/TSX Composite Index for the 10 year period from December 31, 2009 through December 31, 2019 was 3.9% (source spindices.com). Over the same period the total annual return (including dividends) was 6.9% (source spindices.com). 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.
- Interest compounding
- Earnings on an investment's earnings, plus previous interest. This calculator allows you to choose the frequency that your investment's interest or income is added to your account. The more frequently this occurs, the sooner your accumulated earnings will generate additional earnings. For stock and mutual fund investments, you should usually choose 'Annual'. For savings accounts and CDs, 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.
- Additional contributions
- The amount that you plan on adding to your savings or investment each period. This calculator assumes that you make your contributions at the beginning of each period.
- Frequency of contributions
- How often you make contributions to your account. The options include weekly, bi-weekly, monthly, quarterly and annually. This calculator assumes that you make your contributions at the beginning of each period.