Compound savings & inflation: practical guide

What to prepare

• Find the relevant statement, payslip or transaction record rather than estimating from a bank balance.
• Identify the tax year, transaction date and whether each amount is gross, net, annual or monthly.
• Separate known facts from assumed rates and check eligibility against the linked official sources.

Understand the inputs

The calculation method

An effective annual rate converts to a monthly growth factor; month-end contributions compound over the entered term.

Worked example

Illustrative inputs and their result.

Example inputs

Initial balance (€)

5000

Monthly contribution (€)

300

Effective annual return (%)

5

Years

10

Annual inflation (%)

2

Calculated example result

Future Balance

€54,453.42

Inflation Adjusted Balance

€44,670.77

How to interpret the result

Distinguish a tax saving, a tax bill, cash received and money remaining: they are not interchangeable. An estimate does not establish eligibility, filing compliance or when a refund will be paid.

Compare the same income or transaction under one changed assumption at a time. Keep a record of the year, date and assumptions so a change in the result can be explained.

Common mistakes to avoid

• Do not mix tax years or apply a newly announced measure to an earlier transaction.
• Avoid counting an allowance, credit, contribution or loss twice.
• Check exclusions and personal circumstances before relying on the headline result.

Assumptions and sources

Returns and inflation are assumptions. Tax, investment fees and market volatility are excluded.

Related finance & irish taxes guides

• Salary & PAYE: practical guide
• Irish VAT: practical guide
• Capital gains tax: practical guide
• Gift & inheritance tax: practical guide
• Deposit interest & DIRT: practical guide
• Emergency payroll tax: practical guide