WealthCompound Interest Calculator 2026 (Canada)
Last updated: June 2026
Compound interest calculator
TFSA: tax-free growth and tax-free withdrawals. The button is purely informational — the formula stays the same.
For illustration only. Hypothetical return, not guaranteed — markets go up and down. No personalized buy or sell advice.
How compound interest works
The idea fits in one sentence: the interest you earn in one year becomes principal the next year, and earns interest itself. With simple interest, $10,000 at 6% always earns $600 a year. With compound interest, in year 2 you earn 6% on $10,600, or $636; in year 3, on $11,236… and the gap keeps widening. That is why the curve does not rise in a straight line but bends upward.
The calculator applies the future-value formula with regular contributions, aligning the contribution period to the compounding period:
FV = P·(1+r/n)^(n·t) + PMT·[ ((1+r/n)^(n·t) − 1) / (r/n) ]
where P is the starting balance, PMT the contribution per period, r the nominal annual rate, n the number of compounding periods per year, and t the time in years. If you tick "contribute at the beginning of each period," the contribution term is multiplied by (1+r/n) (each deposit works one extra period). Total deposited = P + PMT × number of periods, and interest earned = FV − total deposited.
Worked example
Take $10,000 to start, $300 per month, 6% nominal, monthly compounding, over 25 years, end-of-month contributions. You will have put in $10,000 + ($300 × 300 months) = $100,000 of your own money. The projected future value is close to $250,000 — about $150,000 of compound interest, more than you contributed. In other words, nearly 60% of the result does not come from your deposits. Push the start back 10 years and you would have barely half: that is the weight of the final growth years, the most powerful ones.
TFSA, RRSP or non-registered: does it change the math?
Not the gross growth: 6% compounded gives the same number in all three. The difference is tax, not math. In a TFSA, growth and withdrawals are tax-free. In an RRSP, contributions are deductible but withdrawals are taxed as income. In a non-registered account, investment income is taxable each year — for example, a realized capital gain is included at 50% in your taxable income in Canada in 2026. So the calculator's preset buttons only change the note shown, never the result.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal: $1,000 at 6% earns $60 every year, full stop. Compound interest is calculated on the principal plus the interest already earned: in year 2 you earn 6% on $1,060, so $63.60, and the gap widens every year. That reinvestment of gains into the balance is what creates the exponential curve.
How often does my TFSA or RRSP actually compound?
A TFSA and an RRSP are accounts, not investments: the compounding frequency depends on what you hold inside. An index ETF usually pays quarterly distributions that you reinvest (DRIP), which is effectively quarterly compounding. A GIC often compounds annually, a high-interest savings account monthly. By default this calculator uses monthly compounding, a good approximation for a reinvested ETF portfolio.
Why does starting early change the final result so much?
Because compound interest grows exponentially, not linearly. The last years of an investment are the most powerful: that is when your accumulated balance is largest, so the annual gains are biggest. Delaying the start by 10 years is not losing 10 years of contributions, it is losing the 10 strongest growth years at the end — often half of the final result.
Is 6% realistic for a Canadian index ETF portfolio?
It is a conservative, common assumption for a long-term projection, in nominal terms (before inflation) and after low management fees. Historically a diversified equity portfolio has done more over long stretches, but with negative years too. Nobody guarantees 6%, or any other number: these are estimates for illustration only. Turn on the inflation toggle to see the real value in today's dollars.
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