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# Savings calculator

## Find out what your Canadian dollars could be worth in the future with our monthly compound interest calculator.

Compound interest puts your Canadian dollars to work while you sleep. Over time, your initial deposit can snowball into much more than you realize. Use our savings calculator to find out what setting aside money today could do for your life years from now, and learn how the compound interest formula works.

### Savings calculator

\$
\$
%
##### Number of years
 Total savings Total monthly contributions Interest earned

### What is the compound interest formula?

Here’s the formula for compound interest:

• A – the future value of your money, including earned interest
• P — the initial deposit amount or principal investment
• r — the annual interest rate (as a decimal)
• n — how often interest compounds each year
• t — the number of years the money is invested

For most savings accounts, your interest is compounded monthly, or 12 times per year. For long-term savings products like Guaranteed Investment Certificates (GICs), the formula or compounding period might differ.

#### How to calculate compound interest on bank savings accounts

The compound interest formula is much simpler if you know your bank savings account balance at the end of the business day. Here’s how most banks calculate compound interest on savings account balances:

With most bank savings accounts, interest begins accumulating when you make a deposit and is calculated on your daily closing balance. Typically, your account will be credited at the end of the month (12 times per year). Earnings can be used or spent the same day.

If you close your account, any accumulated interest is deposited the day it’s closed.

#### Compound interest formula example

Say you deposit \$5,000 into a savings account that pays 1.5% interest. For simplicity, we’ll assume there are no bank fees, and you don’t make any subsequent deposits or withdrawals.

If interest compounds daily, or 365 times per year, here’s what you’d earn over five years:

Principal (P)Rate (r)Compound (n)Time (t)Annual interest earned
\$5,0001.5%3651\$75.56
\$5,0001.5%3652\$152.27
\$5,0001.5%3653\$230.13
\$5,0001.5%3654\$309.18
\$5,0001.5%3655\$389.41

If interest compounds monthly, or 12 times per year, here’s what you’d earn over five years:

Principal (P)Rate (r)Compound (n)Time (t)Annual interest earned
\$5,0001.5%121\$75.52
\$5,0001.5%122\$152.18
\$5,0001.5%123\$229.99
\$5,0001.5%124\$308.98
\$5,0001.5%125\$389.17

If interest compounds quarterly, or four times per year, here’s what you’d earn over five years:

Principal (P)Rate (r)Compound (n)Time (t)Annual interest earned
\$5,0001.5%41\$75.42
\$5,0001.5%42\$151.98
\$5,0001.5%43\$229.70
\$5,0001.5%44\$308.59
\$5,0001.5%45\$388.66

If interest compounds annually, or once per year, here’s what you’d earn over five years:

Principal (P)Rate (r)Compound (n)Time (t)Annual interest earned
\$5,0001.5%11\$75.00
\$5,0001.5%12\$151.13
\$5,0001.5%13\$228.39
\$5,0001.5%14\$306.82
\$5,0001.5%15\$386.42

### Compound interest vs simple interest

Often used to bank savings calculations, compound interest is paid on your initial deposit plus any interest earned. The amount you invest in a savings account earns interest, which is rolled into the total investment. The total investment continues earning interest—only this time, on a bigger balance than before.

Often used for loans, simple interest is only calculated on the original loan amount (the principle). Interest is not part of the calculation.

### Compound interest formula FAQs

Written by

#### Stacie Hurst

Associate editor

Stacie Hurst is an editor at Finder, specializing in a wide range of topics including loans, banking products, investing and money transfers. She has a Bachelor of Arts in Psychology and Writing, and she completed one year of law school in the United States before deciding to pursue a career in the publishing industry. When not working, Stacie can usually be found watching K-dramas or playing games with her friends and family. See full bio

Co-written by

#### Peter Carleton

Writer

Peter Carleton is a freelance writer that covers banking and investing, breaking down what you need to know about where you put your money. When Peter's not thinking about cutting-edge banking apps and robo-advisors, he runs a creative agency and spends his spare time cooking or reading. See full bio

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