Compound Interest
Compound interest is interest which is calculated not only on the initial principal investment, but also the accumulated interest of prior periods.
Grow your Money
Since 100% of the earnings can be reinvested, the growth of your RRSP increases rapidly over the years.
Turn $100 a month into over $320,000
For example, you put $100 per month into an RRSP. That's $1,200 per year, and thanks to the first year's interest it quickly becomes $1243.49.
In ten years you've built yourself a tidy sum of $18,012.42. But it gets better. Thanks to tax-sheltered interest earnings, your RRSP is now actually making more money than you are putting in.
You've doubled up! Just take a look at the chart, at the shaded rows, and you'll see how fast the amount builds up over ten, twenty, thirty, and forty years.
| Year | Your Annual Deposit |
Inerest Earned This Year |
Your RRSP at the End of the Year |
||||
| 1 | 1,200.00 | 43.39 | 1,243.39 | ||||
| 2 | 1,200.00 | 142.86 | 2,586.25 | ||||
| 3 | 1,200.00 | 250.29 | 4,036.54 | ||||
| 4 | 1,200.00 | 366.31 | 5,602.85 | ||||
| 5 | 1,200.00 | 491.62 | 7,294.47 | ||||
| 6 | 1,200.00 | 626.95 | 9,121.41 | ||||
| 7 | 1,200.00 | 773.10 | 11,094.51 | ||||
| 8 | 1,200.00 | 930.95 | 13,225.46 | ||||
| 9 | 1,200.00 | 1,101.43 | 15,526.89 | ||||
| 10 | 1,200.00 | 1,285.54 | 18,012.43 | ||||
| 11 | 1,200.00 | 1,484.38 | 20,696.81 | ||||
| 12 | 1,200.00 | 1,699.13 | 23,595.94 | ||||
| 13 | 1,200.00 | 1,931.06 | 26,727.01 | ||||
| 14 | 1,200.00 | 2,181.55 | 30,108.56 | ||||
| 15 | 1,200.00 | 2,452.07 | 33,760.63 | ||||
| 16 | 1,200.00 | 2,744.24 | 37,704.87 | ||||
| 17 | 1,200.00 | 3,059.78 | 41,964.65 | ||||
| 18 | 1,200.00 | 3,400.56 | 46,565.21 | ||||
| 19 | 1,200.00 | 3,768.61 | 51,533.81 | ||||
| 20 | 1,200.00 | 4,166.09 | 56,899.91 | ||||
| 21 | 1,200.00 | 4,595.38 | 62,695.29 | ||||
| 22 | 1,200.00 | 5,059.01 | 68,954.30 | ||||
| 23 | 1,200.00 | 5,559.73 | 75,714.03 | ||||
| 24 | 1,200.00 | 6,100.51 | 83,014.54 | ||||
| 25 | 1,200.00 | 6,684.55 | 90,899.10 | ||||
| 26 | 1,200.00 | 7,315.32 | 99,414.41 | ||||
| 27 | 1,200.00 | 7,996.54 | 108,610.95 | ||||
| 28 | 1,200.00 | 8,732.26 | 118,543.22 | ||||
| 29 | 1,200.00 | 9,526.85 | 129,270.06 | ||||
| 30 | 1,200.00 | 10,384.99 | 140,855.06 | ||||
| 31 | 1,200.00 | 11,311.79 | 153,366.85 | ||||
| 32 | 1,200.00 | 12,312.74 | 166,879.59 | ||||
| 33 | 1,200.00 | 13,393.76 | 181,473.34 | ||||
| 34 | 1,200.00 | 14,561.26 | 197,234.60 | ||||
| 35 | 1,200.00 | 15,822.16 | 214,256.76 | ||||
| 36 | 1,200.00 | 17,183.93 | 232,640.69 | ||||
| 37 | 1,200.00 | 18,654.64 | 252,495.33 | ||||
| 38 | 1,200.00 | 20,243.02 | 273,938.35 | ||||
| 39 | 1,200.00 | 21,958.46 | 297,096.80 | ||||
| 40 | 1,200.00 | 23,811.13 | 322,107.93 | ||||
The above example is based on an 8% annual rate of return and is used for illustration purposes only. Actual returns may vary.
