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Before planning to invest, assessing the future value of your investment is crucial. This helps you analyze the worth of your asset and how it is projected to grow over the years.

 

This can help you build a sizeable portfolio and accumulate funds over time. Thankfully, calculating the future value of an asset becomes easier with a future value calculator. 

 

Read on to understand how an FV calculator works and its benefits.

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What is Future Value?

Future value calculation refers to calculating the value of a current asset at a future date based on specific parameters and projections regarding its growth. Investors and financial planners consider the calculation of future value crucial, as it helps them estimate the value of investments made today in the future.

What is a Future Value Calculator?

It has become effortless to perform future value calculations since you can find many future value calculators online. You can plan better by using a digital FV calculator because it will allow you to input different figures depending on the returns you want to earn or the amount you can afford to pay right now.

 

Future value calculators available online usually include a formula box wherein you must enter the following details:

  • Initial investment details

  • Periodic investments

  • Rate of interest

  • Number of periods

Uses of a Future Value Calculator

It is important to understand how a future value calculation helps and the different reasons it can be used for. Read on below to learn the benefits of future value calculation. 

  • Enables Planning

Most financial institutions and individuals require financial planning. If you have assets today and a general understanding of the market for the next few years, you can derive the future value of your assets.

  • Makes Comparisons Easier

A future value calculation also makes it easier to decide between investment plans. By using a future value calculator, you can assess which investment plan may work better in the future and opt to invest there.

  • Returns Above Inflation

By checking the future value calculation, you can determine the investment required to achieve returns that beat inflation levels over the years.

  • Allows for Corrections

Your investment goals are bound to change over the years. At such times, you must revise your investments and opt for tools more aligned with your current goals.  

Formula to Calculate the Future Value

The future value formula for a lump sum amount, which is the most common amount deposited, is FV=PV(1+i)n. 

 

The Present Value (PV) grows yearly by a factor of 1+i. Multiple variables are factored in while performing the future value calculation. These include:

  • Present value sum

  • Number of years or the time period 

  • Rate of interest

  • Frequency of compounding

  • Cash flow payments

  • Increasing perpetuities and annuities

 

If there is any variable whose value you are unable to fill in at the moment or wish to be excluded, you can always enter 0 in its place. Read below to understand the inputs required to enter for your future value calculation. 

  • Present Value (PV)

The present value refers to the asset's current value in monetary terms.

  • Number of Periods (t)

Make sure you enter the same unit for time (month or year) throughout the form to ensure consistency and accuracy of results. If you are looking for a perpetual annuity, enter p or perpetuity.

  • Interest Rate (R)

Enter a real interest rate you are expecting your asset to appreciate.

  • Compounding (M)

Decide the number of times compounding should occur during each period. Enter the following figures, depending on the parameter mentioned: 

  • 1 in the field if you require only annual compounding

  • 4 if you require quarterly compounding

  • 12 for monthly compounding

  • 365 for daily compounding

  • c for continuous compounding

  • Cash flow Annuity Payment Amount (PMT)

This refers to the cash payment you expect to receive each period.

  • Growth Rate (G)

This field relates to the growth rate of annuity payments each year in percentage terms.

  • Quantity of Payments (Q) Per Period

Q refers to the frequency of payments in the investment. Enter 1 for annual payments, 4 for quarterly payments, 12 for monthly payments, and 365 for daily payments.

  • Timing of Annuity Payments (T)

You can enter the end in this field if you are opting for an ordinary annuity, with the amounts received at the end of the period. However, if you wish to receive the annuity payments at the beginning of the period, select beginning.

  • Future Value (FV)

The future value of an asset is derived by calculating any present value sum plus interest and future annuity payments or other cash flows. 

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How a Future Value Calculator Works

Now that you have learned the formula to calculate the future value of a lump sum deposit, there’s one more to acquaint yourself with. The mathematical formula for future value calculation is:

 

A=PMT ((1+r/n)^nt-1)/(r/n))

 

This formula considers payment deposits to be made at the end of each time period, such as month or year. 

 

Here, 

A = Future value of the investment

PMT = Payment amount for each period

n = Compounding frequency per period

t = Number of periods of investment

Conclusion

Before investing your time in future value calculations, remember that these values are estimates of things that may not happen. Assume an asset’s growth rate is expected to be 8% over a period of 5 years, but the company’s growth decreases to 3% in the next year. 


In such a scenario, the projections of future value will immediately be of no use. The calculator is also not helpful for those with irregular cash flows. That said, the future value can often prove an essential tool for comparing assets and making informed decisions.

Disclaimer

The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort. 

The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products. 

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FAQs on Future Value Calculator

How can you calculate the future worth of your monthly investments?

The future value of your asset depends on inflation, returns, and tax rates. Your investment is considered worthwhile if its returns can beat inflation. Simply use an online future value calculator to assess the FV of your investment.

How can you determine the future value of a sequence of deposits?

Use an FV calculator with the compounding calculation feature. The power of compounding lets you instantly assess the returns of your deposits.

Which two methods are employed for calculating future values?

You can compute the future value using the simple interest and the compound interest formula. Use an FV calculator and calculate your returns effortlessly.

Is the future value calculator easy to use?

Yes, you can use this digital calculator from the comfort of your home any number of times for free. Simply input the required details and get results instantly. 

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