Compound interest: what $200 a month becomes in 30 years
"Compound interest is the eighth wonder of the world." The quote is attributed to Einstein — with no solid proof he actually said it, but the idea itself is unassailable: when the interest you earn starts earning interest itself, growth accelerates over time. It's the snowball effect, and it's the most powerful engine of long-term saving.
Good news: the site just added a [compound interest simulator](/en/compound-interest-calculator). Enter an initial deposit, a monthly contribution, a return and a time horizon, and it shows you month by month how your money works — with a TFSA / RRSP / non-registered comparison and the value in today's dollars. Here's the mechanics behind the tool, with a full worked example.
Compound interest, in one sentence
With simple interest, you earn a fixed percentage on your initial deposit every year. With compound interest, each interest payment is added to the balance — and it's that growing balance that earns the next period's interest. Gains generate gains, which generate gains.
The formula, with monthly compounding:
Future value = P × (1 + i)^n + PMT × (((1 + i)^n − 1) / i)
where P is the initial deposit, PMT the monthly contribution, i the monthly rate (annual rate ÷ 12) and n the number of months. No need to compute it by hand — [the simulator](/en/compound-interest-calculator) does it for you. But understanding the mechanics helps you make better decisions.
The rule of 72: your instant estimate
Divide 72 by your annual rate of return: you get roughly the number of years needed to double your money. At 7% a year, capital doubles about every 10.3 years (72 ÷ 7 = 10.3). Over 30 years, that's almost three doublings: $1 becomes about $8.
It's an approximation — it ignores regular contributions — but it gives you the order of magnitude in five seconds, no calculator needed.
Worked example: $200 a month for 30 years
Take a concrete case, before tax and before fees: no initial deposit, $200 contributed every month, 7% annual return compounded monthly.
| Time horizon | Total contributed | Interest earned | Final value |
|---|---|---|---|
| 10 years | $24,000 | $10,617 | $34,617 |
| 20 years | $48,000 | $56,185 | $104,185 |
| 30 years | $72,000 | $171,994 | $243,994 |
Read that last row twice: of the $243,994, only $72,000 came out of your pocket. The remaining $171,994 — more than two-thirds of the total — is interest on interest. And notice the acceleration: the first 10 years produce $10,617 of interest; the last 10 produce over $115,000. The curve isn't a straight line, it's an exponential: it starts slowly, then takes off.
The real fuel is time — not the amount
Compare two savers contributing $200 a month at 7%:
| 30 years of saving | 20 years of saving | |
|---|---|---|
| Total contributed | $72,000 | $48,000 |
| Final value | $243,994 | $104,185 |
The one who started 10 years earlier contributed $24,000 more, but ends up with $139,809 more. Why? Because starting early buys extra years when the snowball rolls at full speed. Each year of waiting costs more than the previous one.
The best time to start was ten years ago. The second-best time is today — even with a small amount.
The rate changes everything (but you can't control it)
Same $200 a month for 30 years, by average annual return:
| Annual return | Final value after 30 years |
|---|---|
| 4% | $138,810 |
| 6% | $200,903 |
| 7% | $243,994 |
| 8% | $298,072 |
A single percentage point of difference is worth tens of thousands of dollars at the finish line. That's why fees matter so much: a fund advertising 7% gross but charging 2% in fees leaves you with 5% net — and over 30 years, the gap is measured in tens of thousands. Test several rates with the [simulator's](/en/compound-interest-calculator) scenario showdown: that's exactly what it's for.
Important reminder: returns are never guaranteed. Markets fluctuate, and past performance predicts nothing.
Targeting an amount: how much to contribute per month?
Instead of starting from a contribution, start from your goal. Here's the monthly contribution needed to reach an amount in 30 years at 7%:
| Goal in 30 years | Required monthly contribution |
|---|---|
| $100,000 | ~$82 |
| $250,000 | ~$205 |
| $500,000 | ~$410 |
| $1,000,000 | ~$820 |
A million in 30 years means $820 a month — ambitious, but concrete. And with an initial deposit, the required contribution drops: every dollar invested today works for the full 30 years.
TFSA, RRSP or non-registered account?
The same $200 a month isn't worth the same after tax depending on the account. 2026 figures:
| TFSA | RRSP | Non-registered | |
|---|---|---|---|
| 2026 limit | $7,000/year ($109,000 lifetime if eligible since 2009) | 18% of earned income, max $33,810 | None |
| Tax on gains | $0 — never taxed, even on withdrawal | Deferred — deduction today, tax on withdrawal | Gains taxed (50% inclusion for capital gains) |
| Best if… | you want flexibility and zero tax on withdrawal | your tax rate will be lower in retirement | your registered plans are full |
A few benchmarks: in 2026, the TFSA annual limit is $7,000 (source: CRA) and the RRSP deduction limit is $33,810, i.e. 18% of earned income. To estimate your marginal rate — the key number for pricing the RRSP advantage — use [our 2026 income tax calculator](/en/quebec-income-tax-calculator). And if you're torn between plans, our [RRSP and FHSA guide](/en/blog/rrsp-fhsa) walks through each one's rules.
Worth noting: the proposed capital-gains inclusion rate hike to 66.67%, floated in 2024, was cancelled in March 2025. The rate stays at 50% in 2026.
Today's dollars: don't forget inflation
$243,994 in 30 years won't buy what $243,994 buys today. With 2% annual inflation — the Bank of Canada's official target — that amount equals about $134,702 in today's dollars ($243,994 ÷ 1.02^30).
That's why [the simulator](/en/compound-interest-calculator) shows both figures side by side: the nominal value (the impressive number) and the real purchasing power (the number that counts). A 7% return with 2% inflation is a real return of about 5%: that's what actually grows your purchasing power.
The flip side: when it works against you
Compound interest doesn't pick sides. On a debt, it works against you just as hard. Example: a $5,000 balance on a 19.99% card, compounded monthly, with no payments for a year:
$5,000 × (1 + 0.1999 ÷ 12)^12 ≈ $6,096
In one year, the debt grew by $1,096 — without you spending a cent more. That's why paying down high-rate debt beats almost any investment: a "guaranteed return" of 19.99% doesn't exist anywhere else.
Getting the most out of the simulator
The [compound interest simulator](/en/compound-interest-calculator) is more than a final number:
- Scenario showdown: compare two strategies side by side (say $200/month at 6% vs $300/month at 5%) with the same initial deposit.
- Year-by-year breakdown: see exactly when interest overtakes your contributions — the moment the snowball takes over.
- TFSA / RRSP / non-registered comparison: with your gross income, it estimates your marginal rate and shows each account's after-tax result.
- Today's dollars: the inflation-adjusted value at 2%, so you reason in purchasing power.
Try your own scenario: change the contribution, the rate, the horizon, and watch the curve move. It's the best way to feel — concretely — what "exponential" means for your money.
Frequently asked questions
What is the compound interest formula?
With monthly contributions: future value = P × (1 + i)^n + PMT × (((1 + i)^n − 1) / i), where P is the initial deposit, PMT the monthly contribution, i the monthly rate (annual rate ÷ 12) and n the number of months. The site's compound interest simulator applies exactly this formula, month by month.
What is the rule of 72?
Divide 72 by your annual rate of return: you get the approximate number of years to double your capital. At 7%, that's 10.3 years. It's a quick estimate — it doesn't account for regular contributions.
What does $200 a month at 7% grow to in 30 years?
$243,994, including $171,994 of interest on interest, on $72,000 contributed. That's before tax, before fees and before inflation — in today's dollars (2% inflation), it's about $134,702 of purchasing power.
Is a TFSA or an RRSP better for compound interest?
It depends on your marginal rate today versus at withdrawal. The TFSA offers flexibility and zero tax on withdrawal (2026 limit: $7,000); the RRSP gives an immediate deduction (2026 max: $33,810, i.e. 18% of earned income), with tax on withdrawal. Our 2026 income tax calculator helps you estimate your marginal rate.
Does compound interest apply to debt too?
Yes, and it's brutal: $5,000 on a 19.99% card becomes about $6,096 in one year with no payments. Paying down high-rate debt is the equivalent of a guaranteed investment at that rate — unbeatable.
Is the 7% return guaranteed?
No: it's a working assumption, not a promise. Markets fluctuate, management fees reduce the net return, and past performance guarantees nothing. Always test several rates (4%, 6%, 8%) to see the range of possible outcomes. This article is educational, not financial advice.