The calculation keeps deposits and compounding on compatible clocks

Compound growth means each period’s return is added to the balance, allowing later returns to apply to the original money and previous growth. The calculation first converts the entered nominal annual rate and compounding frequency into an effective annual yield. It then converts that yield into an equivalent rate for the chosen deposit period. This avoids treating a weekly deposit as though it arrived only once a year or treating an annual rate as a weekly rate.

The regular-deposit formula is an ordinary annuity, which means each payment enters at the end of its week, fortnight, month or year. That matches the convention used by the stated ordinary-annuity convention. If your bank transfers money at the beginning of each period, every deposit has one extra period to grow, so the result would be slightly higher. The assumption is displayed beside the output rather than hidden.

1. Convert the rate
   Nominal rate becomes an effective yearly and deposit-period rate.
2. Grow the lump sum
   The initial deposit compounds for the full selected term.
3. Add the deposit stream
   Every end-of-period payment grows for its remaining periods.
4. Compare purchasing power
   Inflation discounts the future balance back into today’s rand.

A zero rate still produces a useful result

When the interest rate is zero, the annuity expression would otherwise divide by zero. The page uses a separate branch: future value equals the initial deposit plus every regular deposit. Compound growth is exactly zero. This makes the zero-rate scenario useful for checking the deposit arithmetic and seeing how much of a more optimistic projection depends on returns.

Worked South African saving example

Using the default inputs, R10,000 is deposited now and R500 is added at the end of every month for 10 years. A nominal 6% annual rate compounded monthly produces an effective annual yield of about 6.17%. Total money deposited is R70,000: the initial R10,000 plus 120 monthly deposits totalling R60,000. The projected future balance is about R100,134, so compound growth contributes about R30,134 before tax and fees.

If regular monthly deposits wait two years while the initial R10,000 continues to compound, only 96 deposits are made. The delayed strategy reaches about R79,608. The displayed difference is about R20,525. Part of that difference is the R12,000 not deposited in the first two years; the rest is growth those early deposits and their returns could have earned. The comparison is therefore a cost-of-delay scenario, not merely an interest penalty.

At 2.5% annual inflation, the R100,134 future amount has purchasing power of roughly R78,224 in today’s rand. That does not mean money is removed from the account. It translates a future number into a current-price comparison. A goal stated in today’s prices should be compared with the real value, while a bill fixed in future nominal rand may be compared with the nominal balance.

Deposit frequency and compounding frequency answer different questions

Deposit frequency controls when your money enters the strategy. Paying R500 monthly is not the same annual contribution as paying R500 fortnightly or weekly. When comparing frequencies, either keep each payment constant to test a larger annual saving amount or change the payment so the annual total remains comparable. The result panel reports total deposited so the difference stays visible.

Compounding frequency controls how often return is credited under the nominal-rate assumption. At the same quoted nominal rate, daily compounding produces a slightly higher effective annual yield than monthly compounding, and monthly is slightly higher than annual compounding. The difference is usually far smaller than changing the return rate, term or deposit amount. Confirm how an actual account quotes its rate; some providers advertise an effective rate or calculate interest daily but credit it monthly.

For investment returns rather than bank interest, selecting monthly or daily compounding is a mathematical convention. Market returns are not credited like a guaranteed savings-account rate. The projection can still illustrate long-term growth, but it cannot model volatility, distributions, franking credits or the order in which positive and negative returns occur.

Why time can dominate a small rate change

Early contributions have more periods in which to earn and re-earn returns. Later deposits may be larger but have less time to compound. That is why the delay comparison holds the initial deposit constant and changes only the start of regular contributions: it isolates the effect of missing early payments under the selected assumptions. If a delayed saver later increases contributions, enter that larger payment in a separate scenario and compare both total deposited and final balance.

A longer term magnifies assumption error as well as growth. Over 30 or 40 years, a one-percentage-point change in return or inflation can materially alter the result. Use a range of plausible after-fee, after-tax returns where possible, and revisit the projection as products, contributions and goals change.

Tax, fees and inflation in South Africa

The return field is before tax and fees. South African interest income, dividends and capital gains have different tax rules and exemptions. Collective investments can distribute taxable amounts even when they are reinvested. Retirement-fund products have their own contribution, growth and withdrawal rules. For a personal after-tax projection, use a defensible net rate rather than subtracting a tax percentage from the final balance only.

Account fees, brokerage, advice fees, fund costs and buy–sell spreads reduce the amount that compounds. A fixed fee has a larger proportional effect on a small balance; a percentage fee grows with the balance. This simple page accepts one net scenario through the return input, so you can reduce the assumed rate to approximate ongoing costs, but it does not reproduce each fee’s timing.

The South African Reserve Bank has a 3% inflation target with a tolerance band of plus or minus 1 percentage point. That policy target is not a guarantee for the cost of a particular goal. University fees, housing, health costs and travel can move differently from the consumer price index. Use a goal-specific inflation assumption when credible information is available.

Round numbers only after the calculation

The page keeps full-precision rates inside the calculation and rounds displayed dollars to cents. Rounding a monthly rate early can create visible drift over hundreds of deposits. Actual providers can use daily balances, calendar day counts, payment timing and cent rounding, so a statement may still differ slightly even when the headline inputs appear identical.

Turn the projection into a repeatable plan

Start with amounts that can be sustained after essential expenses and high-cost debt. Automating a transfer shortly after income arrives can make the end-of-period convention reasonably close to reality. Keep an emergency buffer appropriate to your circumstances so a short-term shock does not force a long-term investment sale at an unfavourable time.

Save the input assumptions with the result. A future balance without its rate, term, frequency and timing cannot be audited. Review the plan at least annually and after changes to income, goals, product rates or fees. Compare the actual balance with actual deposits before blaming performance: a missed transfer and a lower return need different responses.

For a target date, work backwards by varying the regular deposit rather than raising the return until the answer fits. Contribution changes are often more controllable than market performance. If the required amount is unaffordable, options include extending the time, reducing the target, using a staged goal or obtaining licensed financial advice about suitable products and risk.