Martin Money Saver Expert

Future Value Formula:

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

Initial Principal (P):

GBP

Annual Interest Rate (r):

decimal

Compounding Periods per Year (n):

Time (t):

years

Periodic Payment (PMT):

GBP per period

Future Value (FV):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What Is The Future Value Formula?

The future value formula calculates how much an investment made today will grow to at a specific future date, considering compound interest and regular contributions. It's essential for financial planning and investment analysis.

2. How Does The Calculator Work?

The calculator uses the future value formula:

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

Where:

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

Explanation: The formula accounts for both the initial investment and regular contributions, compounded at the specified rate over time.

3. Importance Of Future Value Calculation

Details: Understanding future value helps in retirement planning, savings goals, investment comparisons, and making informed financial decisions about long-term wealth accumulation.

4. Using The Calculator

Tips: Enter all values in the specified units. For annual interest rate, use decimal format (e.g., 0.05 for 5%). Ensure all values are positive and compounding periods are at least 1.

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, leading to exponential growth.

Q2: How does compounding frequency affect future value?
A: More frequent compounding (higher n) results in higher future values because interest is calculated and added to the principal more often.

Q3: Can I use this for monthly savings calculations?
A: Yes, set n=12 for monthly compounding and enter your monthly contribution as PMT.

Q4: What if I don't make regular contributions?
A: Set PMT=0 to calculate future value based only on your initial investment.

Q5: How accurate is this calculator for real-world investing?
A: It provides a mathematical projection based on fixed inputs. Real-world returns may vary due to market fluctuations, fees, and tax implications.