About the Future Value Calculator
Future value combines two engines. A lump sum grows on its own by PV x (1 + i)^n, and a stream of equal deposits grows by the annuity factor PMT x (((1 + i)^n - 1) / i). Add them and you have the balance at the end of the term. Here i is the return for one period and n counts the periods, so a monthly plan over twenty years runs 240 periods rather than 20.
The timing switch matters more than people expect. Money paid at the start of each period earns for one extra period, which lifts the annuity part by a factor of one plus i. Over a long horizon that single choice can be worth several percent of the final balance. Salary deductions usually land at the start of the month, while manual transfers tend to happen at the end.
The output splits the final balance into the part that came from your own deposits and the part that came from growth, and shows the money multiple. Watching the growth share climb past fifty percent is the clearest illustration of why an early start beats a bigger later contribution. Two caveats: the rate is assumed steady, whereas real markets deliver it unevenly, and the result is in nominal money, so subtract expected inflation from your return if you want the answer in today's purchasing power. To run the same maths on a bank deposit with a fixed rate, use the FD Calculator.
How to use
- Enter the starting amount you already have, or zero if you are beginning from nothing.
- Set the deposit you will add each period and how many periods fall in a year.
- Type the expected annual return and the number of years you will keep going.
- Switch contributions to the start of the period if your deposit leaves on payday.
Common questions
- What return should I assume?
- Use something defensible for the asset. Long run equity index returns have been near seven to ten percent before inflation, while cash deposits are far lower.
- Does the projection account for inflation?
- No, the balance is in nominal terms. Enter your return minus expected inflation to read the answer in today's money.
- Can I model an annual contribution?
- Yes, set periods a year to yearly and enter the full annual deposit. The compounding then applies once per year.
- Why is the growth larger than I expected?
- Compounding is multiplicative, so each period earns on every previous gain. Doubling the term far more than doubles the growth portion.