Why compounding feels like magic
The math: each period\u2019s interest is added to the principal, so next period’s interest is calculated on a slightly larger base. The growth curve is exponential, not linear. Albert Einstein didn’t actually call compound interest the eighth wonder of the world (it’s an apocryphal quote), but the underlying observation is real: 50 years of 7% compounded annually multiplies your money 29×.
Compounding frequency in Canada
- Daily: high-interest savings accounts (EQ Bank, Tangerine, Wealthsimple Cash)
- Monthly: credit-card balances (against you), some money-market funds
- Semi-annually: Canadian GICs by federal Interest Act default
- Annually: some bonds and structured products
Nominal vs real returns
The number this calculator outputs is in nominal dollars — what the balance will literally read in your account. Real purchasing power is lower because of inflation. If you want a 5% real return and assume 2% inflation, enter 7%. If you want $1M of today\u2019s purchasing power in 30 years, you actually need around $1.8M nominal at 2% inflation — adjust the goal up accordingly.
This isn’t financial advice
Compound interest math is a planning tool. It doesn’t account for taxes, fees, market volatility, sequence-of-returns risk, or your individual circumstances. For real investment planning talk to a fee-only Canadian Certified Financial Planner.