What is future value?
Future value shows what money saved today will grow to at a given interest rate. With compound interest, you earn interest on your interest, so growth speeds up over time:
Future value = amount today × (1 + rate)years, plus the growth of any regular deposits.
For example, $10,000 at 5% compounded monthly grows to about $16,470 in 10 years. Adding $100 a month raises it to about $32,000.
The rule of 72
A quick way to estimate growth: divide 72 by the interest rate to find how many years it takes to double your money. At 6%, money doubles in about 12 years; at 9%, in about 8.
Frequently asked questions
Does compounding frequency matter much?
Less than most people think. Going from yearly to daily compounding at 5% raises the effective rate only to about 5.13%. The rate and the number of years matter far more.
What is the difference between APR and APY?
APR is the simple yearly rate. APY includes compounding, so it shows what you really earn in a year. Savings accounts advertise APY.
How do I account for inflation?
Subtract expected inflation from the interest rate to estimate growth in today's dollars, or use the inflation calculator.