Calculator Money Saving Worksheet

Compound Interest Formula:

\[ FV = P \times (1 + \frac{r}{n})^{n \times t} + PMT \times \frac{(1 + \frac{r}{n})^{n \times t} - 1}{\frac{r}{n}} \]

Initial Principal (P):

Annual Interest Rate (r):

decimal

Compounding Periods Per Year (n):

Time (t):

years

Periodic Payment (PMT):

$ per period

Future Value (FV):

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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 by accounting for both the initial principal and the interest earned on previously accumulated interest. It's a powerful tool for understanding long-term financial growth.

2. How Does The Calculator Work?

The calculator uses the compound interest formula with regular contributions:

\[ FV = P \times (1 + \frac{r}{n})^{n \times t} + PMT \times \frac{(1 + \frac{r}{n})^{n \times t} - 1}{\frac{r}{n}} \]

Where:

$ FV $ — Future value ($)
$ P $ — Initial principal ($)
$ r $ — Annual interest rate (decimal)
$ n $ — Number of compounding periods per year
$ t $ — Time in years
$ PMT $ — Periodic payment ($ per period)

Explanation: The formula calculates how much your money will grow over time with compound interest and regular contributions.

3. Importance Of Future Value Calculation

Details: Understanding future value helps with financial planning, retirement savings goals, investment decisions, and comparing different savings options.

4. Using The Calculator

Tips: Enter all values in the specified units. Ensure the interest rate is in decimal form (e.g., 5% = 0.05). All values must be positive numbers.

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 often should interest compound for maximum growth?
A: More frequent compounding (daily > monthly > annually) results in higher returns due to the compounding effect.

Q3: What if I don't make regular contributions?
A: Set PMT to 0 to calculate future value based only on your initial investment with compound interest.

Q4: Can this calculator handle different compounding frequencies?
A: Yes, simply adjust the 'n' value (e.g., 12 for monthly, 365 for daily compounding).

Q5: Is this calculator suitable for retirement planning?
A: Yes, it's excellent for estimating how regular contributions to retirement accounts can grow over time.