Money Saving Expert Calculator

Future Value Formula:

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

Initial Principal (P):

GBP

Annual Interest Rate (r):

decimal

Compounding Periods (n):

per year

Time (t):

years

Periodic Payment (PMT):

GBP per period

Future Value (FV):

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1. What is the Future Value Calculator?

The Future Value Calculator estimates how much your savings or investments will grow over time, taking into account compound interest and regular contributions. It helps you plan for financial goals by projecting the future worth of your money.

2. How Does the Calculator Work?

The calculator uses the future value formula:

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

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 calculates how money grows with compound interest, accounting for both a lump sum investment and regular contributions.

3. Importance of Future Value Calculation

Details: Understanding future value is essential for retirement planning, saving for major purchases, and making informed investment decisions. It shows the power of compound interest over time.

4. Using the Calculator

Tips: Enter the initial investment amount, annual interest rate (as a decimal), number of compounding periods per year, time in years, and any regular contributions. All values must be non-negative.

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 faster growth.

Q2: How often should interest be compounded?
A: More frequent compounding (monthly vs. annually) results in higher returns due to the compounding effect.

Q3: Can this calculator be used for loans?
A: Yes, the same formula can calculate the future value of loan repayments, though typically loans use present value calculations.

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

Q5: How accurate are these projections?
A: Projections assume a constant interest rate and regular contributions. Actual returns may vary based on market conditions.