Savings Account Calculator Per Month

Monthly Compounding Formula:

\[ FV = P \times (1 + r / 12)^{(12 \times t)} \]

Future Value (FV):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What Is Monthly Compounding?

Monthly compounding is a method where interest is calculated and added to the principal balance each month, allowing your savings to grow faster as you earn interest on previously earned interest.

2. How Does The Calculator Work?

The calculator uses the monthly compounding formula:

\[ FV = P \times (1 + r / 12)^{(12 \times t)} \]

Where:

\( FV \) — Future Value (total amount after compounding)
\( P \) — Principal Amount (initial investment)
\( r \) — Annual Interest Rate (as a decimal)
\( t \) — Time Period in years

Explanation: The formula calculates how much your investment will grow when interest is compounded monthly, which means interest is added to your principal 12 times per year.

3. Importance Of Future Value Calculation

Details: Calculating future value helps you plan for financial goals, understand the power of compound interest, and make informed decisions about savings and investments.

4. Using The Calculator

Tips: Enter your initial investment amount, annual interest rate (as a percentage), and the number of years you plan to save. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does monthly compounding differ from annual compounding?
A: Monthly compounding calculates and adds interest 12 times per year, resulting in slightly higher returns than annual compounding due to more frequent compounding periods.

Q2: What's the difference between APR and APY?
A: APR (Annual Percentage Rate) doesn't account for compounding, while APY (Annual Percentage Yield) does. This calculator shows the APY equivalent for monthly compounding.

Q3: Can I use this for other compounding frequencies?
A: This calculator is specifically designed for monthly compounding. Different formulas are needed for daily, quarterly, or annual compounding.

Q4: Are there any limitations to this calculation?
A: This calculation assumes a fixed interest rate, no additional deposits or withdrawals, and doesn't account for taxes or inflation.

Q5: How accurate is this for real-world savings accounts?
A: While mathematically accurate, actual bank accounts may have slightly different calculation methods, minimum balance requirements, or fee structures that affect final returns.