Interest on the interest.
What a starting balance and a regular deposit become — in future dollars, and in what they will actually buy.
Contribution limits from the Canada Revenue Agency; 2% inflation assumption from the Bank of Canada’s inflation-control target.
| Starting balance | $0 |
| Total deposited | $0 |
| Interest earned | $0 |
| Final balance | $0 |
Deposits are treated as arriving at the end of each period, which is the conservative assumption.
How compounding works
Simple interest pays you on your original deposit. Compound interest pays you on your deposit and on the interest already credited, so growth accelerates. The frequency matters less than people expect — at 6%, moving from annual to daily compounding adds only about 0.18 percentage points of effective yield. Time and the rate do the heavy lifting.
The rule of 72
Divide 72 by your rate of return to get the rough number of years for money to double. At 6% that is 12 years. It is accurate enough for mental arithmetic between about 4% and 12%, and it is the fastest way to sanity-check any investment claim you are shown.
What $10,000 becomes, no further deposits
| Return | Doubles in | 10 years | 25 years | 40 years |
|---|
Where Canadians should hold it
- TFSA — growth and withdrawals entirely tax-free. The 2026 annual limit is $7,000; cumulative room since 2009 is $109,000 for anyone eligible throughout.
- RRSP — contributions deductible, growth sheltered, withdrawals taxed as ordinary income.
- FHSA — deductible going in and tax-free coming out for a first home. $8,000 a year, $40,000 lifetime.
- RESP — the Canada Education Savings Grant adds 20% on the first $2,500 contributed each year, a guaranteed return no market can promise.
- Non-registered — interest is fully taxable at your marginal rate every year, which is why GICs and high-interest savings belong inside a TFSA where possible.
Two things that eat the result
Inflation. At 2%, $100,000 in 25 years buys what about $61,000 buys today. The “in today’s dollars” figure above is the honest one.
Fees. They compound too, in the wrong direction. A 2% mutual fund MER instead of a 0.25% index ETF costs roughly a quarter of your final balance over 30 years — on a $500,000 projection, about $125,000 that goes to the fund rather than to you.