Money Savings Expert UK Martin Lewis

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):

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1. What is the Future Value Calculator?

The Future Value Calculator helps you determine how much your savings or investments will grow over time, taking into account compound interest and regular contributions. This is based on the Money Savings Expert UK Martin Lewis approach to financial planning.

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 calculates the future value of an investment with compound interest and regular contributions, accounting for the frequency of compounding.

3. Importance of Future Value Calculation

Details: Understanding future value is essential for financial planning, retirement savings, investment decisions, and achieving long-term financial goals.

4. Using the Calculator

Tips: Enter all values in the required units. Ensure the interest rate is in decimal form (e.g., 5% = 0.05). All values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: What is compound interest?
A: Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods.

Q2: How does compounding frequency affect future value?
A: More frequent compounding results in higher future values because interest is calculated more often.

Q3: 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 principal and accumulated interest.

Q4: Can I use this calculator for different currencies?
A: While the calculator uses GBP, you can use it with any currency as long as you maintain consistency in your inputs.

Q5: How accurate is this future value calculation?
A: The calculation provides a mathematical estimate based on constant interest rates and regular contributions. Actual results may vary due to market fluctuations.