What Does a Future Value Calculator Mean?

Everyone wants to know their financial future as they start investing. Estimating how much money you can make from your investments is crucial, and a future value calculator can help you to do so.

This future value of investment calculator can help you make effective financial decisions based on your financial objectives. PL Capital Group – Prabhudas Lilladher provides a future value calculator, which you can use for free.

Let us understand the entire process of calculating your future value and the advantages of using the future value calculator.

How Can a Future Value Calculator Help You?

A future value calculator can help you understand what your investments would be worth in future from now. This calculator also helps find out if the value of your current savings and investments is enough to meet your financial needs in the future.

If you find it inadequate, you can take necessary actions by saving or investing in higher-yielding assets. PL’s future value calculator is often used in bonds, certificates of deposit, or interest-bearing accounts.

Whether you are an investor or a borrower, this calculator assists you in estimating the growth potential of numerous assets, including fixed deposits and savings accounts, stocks, and allows you to project how your investments will grow over time.

How to Calculate the Future Value of Your Investments?

To calculate the future value of your investments, you need to know the formula for it. The future value formula includes the current value of the assets, the interest rate, and the periods between the future and present dates. However, the calculation of the future value can be done in 2 ways:

1. For Simple Interest

The future value formula for simple interest will be:
FV= (P*n*r) + P
In this formula:

Let us break it down using an example. Suppose you invested INR 1 lakh at a simple interest of 10% per annum for 10 years. At the end of your tenure, you will receive:

INR [1,00,000+ (1,00,000*10%*10)] = INR 2,00,000

2. For Compound Interest

In compound interest, the calculation happens each time on the previous closing balance. The future value formula, for compound interest, will be:
FV= PV (1+r/n) t/n
In this formula:

Let us consider the previous example with annual compounding frequency. You will get:

INR [1,00,000 (1+ 0.10/1)10/1] = INR 2,59,374

The above formulae are good if you want to calculate the future value for a lump sum investment. However, to know the future value of your annuity or systematic investment plan (SIP), you should consider the formula below:

FV = P [(1+r/n) nt – 1) / (r/n)]
In this formula:

When you do this calculation manually, it can be confusing and time-consuming for you. However, the future value calculator can make it easy to understand the complete process.

How to Use the Future Value Calculator?

Follow the steps below to use the future value calculator offered by PL Capital:

1. Enter the amount of money with which you are starting your investment.

2. Enter the annual interest rate or percentage you expect from the investment.

3. Determine your investment period by specifying the number of years you want to invest your money.

4. Choose the compounding frequency on an annual, semi-annually, or quarterly basis.

5. Click on the ‘Submit’ button to calculate the future value of your investment. The result will be visible on your device.

Advantages of Future Value Calculator

The future value calculator can be beneficial for both investors and borrowers. Below are the benefits that an investor can avail using this calculator:

● Goal Setting

Whether they are going to buy or build an emergency plan, this calculator helps investors determine how much they need to invest to meet specific financial objectives.

● Risk Management

A future value calculator also helps investors manage the potential risks associated with different investment options.

● Comparing Different Options

Investors can also compare different investment opportunities by entering various investment tenures, interest rates, and initial investment amounts in the calculator. This helps them to make informed choices between different investment options.

● Financial Planning

Lastly, investors can also plan for their financial goals. Investors can set realistic targets and make sound decisions using this calculator.

Now, here are the benefits a borrower can avail while using this calculator:

● Planning for a Loan

A future value calculator also helps borrowers to plan for loan repayment. This allows borrowers to create scheduled budgets by estimating the total repayment amount.

● Loan Comparison

Using this calculator, borrowers can also compare different loans by assessing the difference in investment tenures, interest rates, and initial investment amounts.

● Budgeting

Borrowers can budget and ensure they have sufficient funds for future commitments by knowing the future value of loan repayments.

● Interest Cost Analysis

The future value of investment calculator helps borrowers to find out the total cost of loans. In this case, the calculator finds out the total interest to be paid over the loan's tenure. This will help in choosing loans with favourable interest rates and terms.