Future Value Calculator
Calculate how your money grows over time with compound interest. Plan lump sum investments, regular contributions, or find out how much you need to save to reach your financial goals.
Lump Sum Future Value
Future Value
$20,097
After 10 years at 7%
Total Interest
$10,097
Effective Rate
7.23%
The Power of Compound Interest
Compound interest is when you earn interest on both your initial investment and previously earned interest. This creates exponential growth over time — often called the "eighth wonder of the world." The earlier you start investing, the more time your money has to compound and grow.
Understanding Future Value
What is Future Value?
Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. It's a fundamental concept in finance that helps investors understand how their money will grow over time through the power of compound interest.
Whether you're saving for retirement, a house down payment, or your child's education, understanding future value helps you make informed decisions about how much to save and invest.
Key Factors
- Principal: Your initial investment amount
- Interest Rate: The annual return on your investment
- Time: How long your money is invested
- Compounding Frequency: How often interest is calculated
- Additional Contributions: Regular deposits you make
The Future Value Formula
Lump Sum Formula
FV = P × (1 + r/n)nt
FV = Future Value
P = Principal (initial investment)
r = Annual interest rate (decimal)
n = Compounding periods per year
t = Number of years
The Power of Compound Interest
Compound interest is often called the "eighth wonder of the world" because of its ability to grow wealth exponentially. Unlike simple interest (which only earns on the principal), compound interest earns returns on both the original investment AND previously earned interest.
Example
$10,000 invested at 7% for 30 years:
Simple Interest: $31,000
Compound Interest: $76,123
Difference: $45,123 extra!
Compounding Frequency Matters
$10,000 at 10% for 1 year:
Common Investment Scenarios
Retirement Savings
Starting early is crucial. A 25-year-old investing $500/month at 7% will have $1.2M by age 65. Starting at 35 yields only $567K.
The 10-year head start doubles the final amount.
Education Fund
$250/month for 18 years at 6% grows to about $96,000 — enough for many college expenses.
529 plans offer tax advantages for education savings.
Emergency Fund
$200/month for 3 years at 4% (high-yield savings) builds to about $7,600 — a solid emergency buffer.
Keep emergency funds in liquid, low-risk accounts.
The Rule of 72
The Rule of 72 is a quick way to estimate how long it takes your money to double. Simply divide 72 by your annual return rate.
4% return
18 years
6% return
12 years
8% return
9 years
10% return
7.2 years
Frequently Asked Questions
What return rate should I use?
Historical stock market returns average 7-10% annually (after inflation, closer to 7%). For conservative estimates, use 5-7%. For savings accounts, use current rates (typically 4-5% for high-yield accounts as of 2024).
Should I invest a lump sum or contribute regularly?
Mathematically, a lump sum invested immediately typically outperforms dollar-cost averaging about 2/3 of the time. However, regular contributions are more practical for most people and reduce the risk of investing at a market peak.
Does this account for inflation?
This calculator shows nominal (not inflation-adjusted) future value. To account for inflation, subtract the expected inflation rate (historically ~3%) from your assumed return rate. For example, use 4% instead of 7% for real (inflation-adjusted) returns.
Important Disclaimer
This calculator provides estimates based on the inputs you provide. Actual investment returns vary and are not guaranteed. Past performance does not predict future results. Consider consulting a financial advisor for personalized advice. This tool does not account for taxes, fees, or market volatility.