Interest Calculator Savings Canada

Compound Interest Formula:

\[ A = P \times (1 + R / n)^{(n \times T)} \]

Principal (P):

CAD

Annual Interest Rate (R):

decimal

Compounding Frequency (n):

per year

Time (T):

years

Maturity Amount (A):

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1. What is the Compound Interest Formula?

The compound interest formula calculates the future value of an investment or savings account where interest is compounded at regular intervals. It's particularly relevant for Canadian savings accounts with various compounding frequencies.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + R / n)^{(n \times T)} \]

Where:

\( A \) — Maturity amount (CAD)
\( P \) — Principal amount (CAD)
\( R \) — Annual interest rate (decimal)
\( n \) — Compounding frequency per year
\( T \) — Time in years

Explanation: The formula calculates how much your initial investment will grow when interest is compounded at regular intervals over time.

3. Importance of Compound Interest Calculation

Details: Understanding compound interest helps Canadians make informed decisions about savings and investments, showing how money can grow over time through the power of compounding.

4. Using the Calculator

Tips: Enter principal in CAD, annual interest rate as a decimal (e.g., 0.05 for 5%), compounding frequency (how many times per year interest is added), and time in years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (daily vs. annually) results in higher returns due to interest being calculated on previously earned interest more often.

Q3: Are Canadian savings accounts typically compounded?
A: Yes, most Canadian savings accounts compound interest, though frequencies vary (monthly, quarterly, or annually depending on the institution).

Q4: How should I enter the interest rate?
A: Enter the annual rate as a decimal. For example, 5% should be entered as 0.05, not 5.

Q5: Does this calculator account for taxes?
A: No, this calculator shows pre-tax returns. Remember that interest earned in non-registered accounts is taxable in Canada.