How much money will I earn if I invest C$100 a month for 20 years? You would contribute C$24,000 over 20 years. How much you may have at the end depends on the investment return, fees, taxes and whether you make every contribution.
For illustration, investing C$100 at the end of each month could grow to approximately C$32,800 at a 3% annual return, C$41,100 at 5% or C$52,000 at 7%, assuming monthly compounding and no fees or taxes. These figures are examples, not guaranteed results. Market-based investments can lose value, and actual returns will vary.
How much would you contribute?
Contributing C$100 each month means setting aside C$1,200 per year. Over 20 years, the total amount you personally deposit is:
- C$100 per month × 12 months = C$1,200 per year
- C$1,200 per year × 20 years = C$24,000 contributed
If your money earns no return, your ending balance would be C$24,000 and your investment earnings would be C$0. This is the only amount that can be calculated with certainty from the monthly contribution alone.
What could C$100 a month grow to?
The following examples assume that you invest C$100 at the end of every month for 20 years. They use an annual return compounded monthly and do not include investment fees, taxes or inflation.
| Illustrative annual return | Approximate ending balance | Approximate investment growth |
|---|---|---|
| 0% | C$24,000 | C$0 |
| 3% | C$32,800 | C$8,800 |
| 5% | C$41,100 | C$17,100 |
| 7% | C$52,000 | C$28,000 |
The growth amounts are approximate and are calculated by subtracting your C$24,000 in contributions from each ending balance. They should not be interpreted as forecasts. Investment returns are not earned in a straight line, and a portfolio can rise or fall from one month or year to the next.
How compound growth affects the result
Compound growth occurs when investment earnings remain invested and can generate additional earnings. With regular monthly contributions, each deposit has its own period of time to participate in potential growth. Earlier contributions generally have more time to grow than later contributions.
Compound growth does not mean that your account increases by the same amount every month. Market-based investments may produce positive or negative returns, and some periods may result in losses. A longer investment horizon may give you more time to recover from market declines, but it does not eliminate investment risk.
Interest calculations can also depend on the compounding frequency and the way an institution calculates interest. For investments, distributions, trading costs, management expenses and taxes may affect your actual result.
What determines how much you may earn?
- Investment type: A savings account, GIC, bond fund, equity fund or individual stock has a different risk and return profile.
- Return: A higher potential return generally involves greater uncertainty and a greater possibility of losing money.
- Fees: Trading charges, account fees, advisory fees and fund expenses reduce the amount that remains invested.
- Taxes: Investment income and gains may be taxed differently depending on the type of income and the account used.
- Contribution timing: Depositing at the beginning rather than the end of each month can slightly increase the amount of time each contribution is invested.
- Consistency: Pausing contributions, withdrawing funds or missing deposits can materially reduce the final balance.
- Inflation: Inflation can reduce what your ending balance can buy in the future.
Before choosing an investment, review all applicable costs. Financial advisors and institutions may be paid through commissions, trading fees, advisory fees or charges based on assets managed. Ask for a clear explanation of each cost and how it affects your projected return.
Which Canadian account could be suitable?
An account and an investment are separate decisions. The account determines how contributions, withdrawals and taxes may be handled, while the investment determines the potential return and risk.
A Tax-Free Savings Account, or TFSA, may be considered for eligible savings and investments because qualifying income and withdrawals generally receive tax treatment different from a non-registered account. Check your available contribution room and the investments permitted in the account before making deposits.
An RRSP may be relevant for retirement planning, but contributions, deductions and withdrawals have specific tax implications. A non-registered account may offer flexibility, although investment income and gains can have tax consequences. A savings account or GIC may be appropriate for money that must remain accessible or protected, while market-based investments may be considered for longer-term goals by investors who can accept fluctuations.
Advantages and limitations of investing C$100 monthly
Advantages
- It creates a simple and repeatable saving habit.
- It may reduce the temptation to wait for a perfect market entry point.
- It provides a clear contribution target that can be reviewed as your income changes.
- It gives your money more time to benefit from potential compound growth.
Limitations
- C$100 per month may not be enough to meet a specific retirement, education or other long-term target.
- Returns are not guaranteed for market-based investments.
- Fees and taxes can reduce the final amount.
- Inflation can reduce the purchasing power of the ending balance.
- Withdrawals or missed deposits can significantly reduce potential growth.
How to estimate your potential outcome
Use a compound-growth calculator to test different assumptions. Enter:
- Monthly contribution: C$100.
- Investment period: 20 years.
- Expected annual return: Test several assumptions rather than relying on one forecast.
- Contribution timing: Choose whether deposits are made at the beginning or end of each month.
- Compounding frequency: Use the frequency specified by the calculator or investment product.
- Fees and taxes: Include estimates where the calculator allows them.
For the examples in this article, the calculation assumes end-of-month deposits, monthly compounding and no fees, taxes or inflation. The result should be treated as an illustration, not a promise. A qualified financial professional can help assess whether your assumptions match your objectives, risk tolerance and financial circumstances.
Practical steps before you begin
- Build an emergency fund before committing money to investments with market risk.
- Review high-interest debt, since its borrowing cost may exceed the return you could earn by investing.
- Choose an account that fits your tax and withdrawal needs.
- Compare investment fees, restrictions, liquidity and risk.
- Automate the C$100 monthly contribution if it fits your budget.
- Review the plan periodically and adjust it when your objectives or financial circumstances change.
Setting a specific goal, contribution amount and timeframe can make your plan easier to maintain. Investments with higher potential returns may also involve greater risk, so consider your time horizon and ability to tolerate losses.
Frequently asked questions
Is C$24,000 the amount I will earn?
No. C$24,000 is the amount you contribute over 20 years. Your investment earnings are the difference between the final account value and your contributions, before or after fees and taxes depending on how the calculation is presented.
How much could C$100 a month become after 20 years?
With no investment return, you would have C$24,000. Under the illustrative assumptions used above, the ending balance could be approximately C$32,800 at 3%, C$41,100 at 5% or C$52,000 at 7%, before fees, taxes and inflation. Actual results may be lower or higher.
Can I lose money while investing C$100 monthly?
Yes. Market-based investments can lose value, particularly during market declines. Risk varies according to the investment selected, and even a long holding period does not guarantee a positive return.
Should I increase the monthly contribution?
If your budget allows, increasing contributions may improve your ability to reach a long-term goal. The appropriate amount depends on your income, expenses, debt, emergency savings and objective.
Is a higher projected return better?
Not necessarily. A higher projected return usually comes with greater uncertainty and a greater possibility of loss. Consider an investment based on your time horizon and ability to tolerate fluctuations, rather than choosing only the highest projection.
Financial disclaimer: This article is for general information and does not constitute personalized financial, tax or investment advice. Investment products involve risks, and returns are not guaranteed. Eligibility for registered accounts, tax treatment and product suitability may vary. Consult a qualified Canadian financial or tax professional before making an investment decision.
References
- Financial Consumer Agency of Canada — Savings accounts and compound interest.
- Financial Consumer Agency of Canada — Setting savings and investment goals.
- Financial Consumer Agency of Canada — Savings and investments.
- Financial Consumer Agency of Canada — Choosing a financial advisor.
- Canada Revenue Agency — Contributing to a Tax-Free Savings Account.