1. What is the Future Value Formula?

The Future Value (FV) formula calculates how much a current savings amount (principal) will grow over time with compound interest. It's fundamental in personal finance planning and investment analysis.

2. How Does the Calculator Work?

The calculator uses the Future Value formula:

Where:

• \( P \) — Principal amount ($)
• \( r \) — Annual interest rate (as decimal)
• \( t \) — Time in years
• \( FV \) — Future value ($)

Explanation: The formula accounts for compound interest, where interest is earned on both the initial principal and accumulated interest from previous periods.

3. Importance of Future Value Calculation

Details: Understanding future value helps with financial planning, retirement savings goals, and comparing different investment options.

4. Using the Calculator

Tips: Enter principal in dollars, interest rate as percentage (e.g., 5 for 5%), and time in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal, while compound interest is calculated on principal plus accumulated interest.

Q2: How often is interest compounded in this calculator?
A: This calculator assumes annual compounding. For different compounding periods, the formula would need adjustment.

Q3: Can I calculate monthly contributions with this?
A: No, this calculates one-time investments. For regular contributions, you'd need the future value of an annuity formula.

Q4: How does inflation affect future value?
A: This calculates nominal future value. For real (inflation-adjusted) value, you'd need to subtract expected inflation from the interest rate.

Q5: What's a good interest rate for savings?
A: As of 2023, high-yield savings accounts typically offer 3-5%, while long-term stock market averages are about 7-10% annually.