How can you tell how much profit you will gain from an investment in the future? While it may seem like a complicated process, it’s quite easy with the right tool. With the Future Value Calculator, you can learn how much your initial investment will become at a specific point in the future. However, first, let’s learn about the concepts involved in the future value of an investment.

What Is the Future Value of Money?

Simply put, the future value of money is the value of an asset (money) at a specific date in the future. It is the measurement of the sum of money in the future when a certain interest rate or rate of return is taken into consideration. This is in contrast to the present value of money, which is your initial investment before the investment has matured.

By knowing the future value of money, you can learn how much your present money can grow after a given amount of time. This can help you gauge if investing the money is worth the time in which you can’t spend this money because it is still maturing.

Using the Future Value Calculator

The Future Value Calculator is a simple tool that you can use to compute for the future value of your investment. To compute for this, you’ll need the following information:

The present value, which refers to the amount of money you wish to invest.

The interest rate, which the rate of return expressed in a percentage.

The period, which is the number of years and months you wish to invest your money.

The compound frequency, which is the number of times the interest rate is applied per year. This can be yearly (1), half-yearly (2), quarterly (4), monthly (12), weekly (52), or daily (365). The greater the compound frequency, the more interest your present value can earn.

When you input all this information, the Future Value Calculator will give you the future value of your investment.

For example, you wish to invest $100 at an interest rate of 1.5% over a period of 2 years and 6 months with a monthly compound frequency.

To compute for this, you’ll need the following formula:

Future Value = Present Value * (1 + Interest Rate / Compounding Frequency) ^ (The Period in Years * Compounding Frequency)

When you substitute the values in the example, you will get:

Future Value = $100 * (1 + 0.015 / 1)^2.5 
                         = $100 * (1.015 / 1)^2.5
                         = $100 * 1.015^2.5
                         = $100 * 1.0379
                         = $103.79

After 2.5 years, your initial investment of $100 will become $103.79. This indicates that after 2 years, your initial investment will grow by $3.79.

How Can You Double Your Money?

The Rule of 72 allows you to know how much time it will take for your money to double considering the amount of time. The rule states that if the interest rate multiplied by the number of years equals 72, the present value of your money will double.

So for example, if you invest $100 with an interest rate of 6% over a period of 12 years with a yearly compounding interest, your future value will be $201.22.