What this does
Enter what you have, what you add each month, a rate and a number of years. It separates what you contributed from what the money earned, year by year, because those two numbers behave very differently over time and the split is the point of the whole exercise.
Why this one
Two things most compound calculators leave out. It shows contributions and growth as separate quantities, so you can see the year growth overtakes what you are putting in. And it discounts the result for inflation, because $1,000,000 in forty years is not $1,000,000, and a projection that does not say so is selling something.
The formula
each period: balance = balance x (1 + annual rate / periods) + contribution
contributions land at the END of each period, so this month's deposit earns nothing this month
in today's money = balance / (1 + inflation) ^ yearsPublished so you can check it. A calculator about money that will not show its working is asking to be trusted on the one thing you cannot verify.
Questions
- What rate should I use?
- That is your assumption, not ours, and this tool will not suggest one. A rate is a claim about the future. What this can tell you is how sensitive the answer is: change the rate by one point and watch what happens to the final number.
- Why is my result lower than another calculator's?
- Almost always because contributions here land at the end of each period rather than the start. Depositing at the start earns one extra period of growth on every contribution. Real deposits arrive throughout the month, so end of period is the conservative choice.
- Does this account for tax?
- No. Inside a TFSA there is nothing to account for. Inside a non-registered account there is, and how much depends on your income, your province and what the money is invested in.