How the Future Value Calculator Works
Future value is what money you have today, and money you add over time, will be worth at a later date, once it has earned interest. It is the basic tool for planning savings: for a house deposit, a child's education, or retirement. The Future Value Calculator shows how a starting amount and regular savings grow with compound interest.
What you enter
- Starting amount: the money you already have.
- Regular contribution: the amount you add each period. Leave it at 0 if you add nothing.
- How often you add and compound: yearly, twice a year, quarterly or monthly. The interest is added at the same rhythm.
- When in each period: at the end, which is the usual case, or at the start.
- Years and yearly return: how long you save, and the growth you expect.
- Inflation: used to show the result in today's money.
Compound interest
With compound interest, you earn interest on your interest. After each period, the interest is added to the balance, and the next period's interest is worked out on the bigger amount. This makes the balance grow faster and faster over time.
The formulas
The yearly return is divided by the number of periods in a year to get the rate i for each period. With n periods in all, the two parts of the future value are:
starting amount grows to = start x (1 + i)^n contributions grow to = payment x ((1 + i)^n - 1) / i
The future value is the two added together. If you add money at the start of each period, the second part is multiplied by (1 + i), because every payment has one more period to grow. If the return is 0%, nothing grows, and the contributions are just the payment times the number of periods.
A worked example
You have $10,000 and add $500 a month for 20 years. The return is 7% a year, compounded monthly. Inflation is 2.5%.
| Result | Amount |
|---|---|
| Your $10,000 grows to | $40,387.39 |
| Your $500 payments grow to | $260,463.33 |
| Future value | $300,850.72 |
| Total you put in | $130,000 |
| Interest earned | $170,850.72 |
| Future value in today's money | $183,600.45 |
| Time for money to double | 9.93 years |
You put in $130,000, and the interest adds $170,851, which is more than the money you paid in. If you add each payment at the start of the month instead of the end, the future value is $302,370.09, a little higher, because every payment earns one more month of interest.
Chart: how the balance grows
The same example, in thousands of dollars. The growth speeds up over time, because the interest itself starts to earn interest:
Start █ 10 Year 5 ███████ 50 Year 10 ██████████████ 107 Year 15 █████████████████████████ 187 Year 20 ████████████████████████████████████████ 301
In the first 10 years, the balance grows by about $96,000. In the last 10 years, it grows by nearly $194,000.
The return and time both matter
The same savings after 20 years, at different returns:
| Yearly return | Future value |
|---|---|
| 5% | $232,643 |
| 6% | $264,122 |
| 7% | $300,851 |
| 8% | $343,778 |
| 9% | $394,035 |
A single amount also grows by compounding. For example, $10,000 at 5% for 10 years, compounded yearly, becomes $16,288.95.
Today's money
Prices rise, so $300,851 in 20 years buys less than $300,851 does today. The calculator divides the future value by the effect of inflation to show what it is worth in today's terms. At 2.5% inflation, that is $183,600.
Tips
- Start early. Time is the most powerful part of compounding.
- Add regularly. Steady contributions do more than the starting amount over long periods.
- Watch fees. A fee of 1% a year takes a big share of your growth over 20 years.
- Be careful with high returns. A steady 7% is a guess, and real returns move up and down.
What this calculator does not include
- Taxes on the interest or on withdrawals.
- Fees, which lower your real return.
- Changes in your contributions over time, or in the rate.
- Ups and downs in the markets. Actual results will differ from a steady return.
This tool gives an estimate for general information only. It is not financial or investment advice. Returns are not guaranteed.