Use this calculator to compute how much you would need to invest now in order to have your investment grow to a specific amount within a specified time-frame. For example, if you want to have a certain amount set-aside to pay for a child's college tuition, this calculator will tell you how much you would have to deposit today in order to accumulate the necessary funds by the time your child reaches 18 years of age. This is often referred to as "Present Value" analysis. To compute the Present Value of a Future Amount, fill in the first three text boxes and then click the "compute" button.
Determine the Time Needed to Succeed
When saving up for a major purchase in the distant future, most investors will admit it is tough to stay motivated without seeing an exact balance sheet of figures such as the target savings goal, the anticipated interest rate yield on the money, and the time you have to reach that goal. These three key numbers, given to the compound savings calculator, will produce an analysis of your present value. Essentially, by informing the calculator how much you will ideally have saved in five or ten years, the tool will spit out a number that represents how much you will have to deposit now in order for that to be a realistic goal.
Saving for a Mega Purchase Using the Calculator
If we employ the computations of the compound savings calculator to aid someone who is planning far in advance to purchase a new vehicle, we can get a good idea of how it serves as a financial planning tool. If you had a future savings goal of $15,000 for your dream four wheel driver, and a period of five years in which to save up, now would be a good time to start preparing to put money aside and therefore save in the long term. Say, for example, that you were lucky enough to land a single deposit investment account with a 4% interest rate. You would need to deposit a total of $12,328.91 in order to meet your desired achievement.
Thus, the guessing game is taken out of advance purchase savings and you are met with a finite goal that is both achievable and financially beneficial. By putting away a significant amount of cash now into the highest interest rate savings account or CD you can find, you will be rewarded with a decent annual yield since you are effectively handing that money over to your bank or financial institution for that specified length of time of your investment. The interest ends up composing a fairly substantial portion of the total money needed, in this case, or $2671.09. This is the difference between the end savings goal and your present value deposit needed, and represents the amount of money that you earned in interest over the five year length of your term.
How Variables Affect the Calculation
As you can see, the minute fluctuation of the variables in the scenario alter the output of the calculator enormously. The more years you have before you must reach your savings goal, the less you will have to deposit now and the more interest you are capable of earning. The higher your interest rate, the less you will have to shell out altogether and the shorter amount of time you will require to reach your grand total. The smaller the amount of money you need at the end of the investment, the longer that you have to work slowly up from transforming a small initial deposit into a larger one.
If time and money aren't on your side, you had better hope that the current market interest rate is. Consequently, if you've got plenty of years and a reasonable initial deposit, you can accept the fate of the lower yield with no qualms. Try juggling these four variables within the calculator to see what investment scenarios you can conjure up.