This calculator will help you to determine the future value of a one-time investment.
To calculate the future value of a one-time investment, enter the deposit amount, the interest rate you expect to earn, and the number of years you will allow the investment to grow, then click the "Compute" button.
Understanding Interest Rates for Real
Investments of a single deposit amount, whether large or small, can be an excellent way of ensuring the success of your financial future. When you are planning for an upcoming event such as a new house, a child attending college, or a vehicle upgrade, you want to ensure that you have the appropriate funding to be able to spend that cash without worry about destructing the delicate balance of your budget. By storing away a lump sum in a dedicated savings account just like the proverbial cash under the mattress, you will be able to ignore and even forget about that sum of money until the time comes when it is needed. Even if you don't foresee a particular forthcoming event but decide to have the fund as an emergency savings spot from which you have the freedom to do a withdrawal whenever you choose, it is still a valuable financial tool to keep in your toolbox.
Investment accounts come in a smorgasbord of different styles. Multiple deposit accounts, such as an exponentially growing retirement savings plan, are good choices for those who can afford only to contribute a certain percentage of their income each month. Thus, the investment starts small and gradually increases over time. The further along it gets in its lifetime, the more interest it earns as each successive deposit earns interest and even its interest earns interest. By the withdrawal period, the account contains a much higher available balance than when you first opened it with your initial deposit.
Single deposit accounts are those in which a one time amount is set aside by the investor into an exclusive high interest savings account. No further funds are contributed, and generally the holder of the account is not permitted to withdraw these funds at any point in the lifetime of the investment without penalty for early termination. The only money that is added to the account is the percentage of interest that the investor has been offered. This annual percentage rate is generally compounded annually, although it might be compounded daily, monthly or quarterly depending on the financial institution's particularities.
Finally, the single deposit account reaches the end of its term – say, 5 or 10 years. Only then is withdrawal an option, and of course the available amount includes the initial deposit in addition to whatever interest the account has earned. This type of investment is essentially a way for you to loan money to the offering bank or financial service in return for gaining sometimes large amounts of interest on the sum.
Certificates of Deposit
The classic example of the single deposit account is the certificate of deposit (CD). While some CDs will permit you to contribute extra funds once the account is opened, most allow only one original deposit. They then hold your money for the length agreed to – between three months and five years, generally – and compound your interest in the final stage.
If a CD or other form of single deposit account is what you're after, you can calculate just how much your gain will be by determining the value of your future one time investment. Given the original sum of cash, the annual interest rate and the length of the investment, you will be able to see the amount of interest that your deposit will earn during that time and therefore judge whether a CD investment fits within your financial sphere.