A Monthly Investment Savings Calculator is a financial tool that helps investors estimate their savings growth over time. By making regular monthly investments, you can take advantage of compound interest to grow your savings significantly.
Formula for Monthly Investment Savings Calculation
The formula for calculating the future value of an investment is:
\[FV = P \times (1 + r)^n\]
Where:
FV = Future Value
P = Principal Investment Amount
r = Monthly Interest Rate (Annual Rate / 12)
n = Total Number of Monthly Payments (Investment Term in Years × 12)
Calculation Steps
Calculate the monthly interest rate by dividing the annual rate by 12.
Determine the total number of monthly payments by multiplying the investment term in years by 12.
Apply the formula to calculate the future value of the investment.
Calculate the total interest earned by subtracting the original investment amount from the future value.
Example
Let's consider a scenario with the following details:
Investment Amount: $10,000
Interest Rate: 5% per year
Investment Term: 10 years
Calculation:
Monthly interest rate: 5% / 12 = 0.4167%
Number of monthly payments: 10 × 12 = 120
Future value: $16,470.09
Total interest earned: $6,470.09
Green: Principal ($10,000) | Red: Total Interest ($6,470.09)
In this example, the investor would have a future value of $16,470.09 after 10 years. The total interest earned would be $6,470.09, demonstrating the power of compound interest over time.
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