How to use it
- Enter your savings goal and what you have already saved.
- Enter the annual interest rate your savings earn, or 0.
- Choose Time to reach the goal and enter your monthly deposit, or Monthly deposit needed and enter the number of years.
- Read the result, the final balance and how much of it is interest.
How it works
Interest is compounded monthly at the annual rate ÷ 12, and deposits are made at the end of each month. After n months the balance is S × (1 + i)^n + D × ((1 + i)^n − 1) ÷ i, where S is your current savings, D the monthly deposit and i the monthly rate.
- Time: the smallest whole number of months for which the balance reaches the goal.
- Deposit: the D that makes the balance equal the goal after n months. If your current savings reach the goal with interest alone, it is 0.
Worked example
Your goal is 20,000, you have 5,000 and you can save 500 a month at 6% a year. It takes 27 months (2.25 years). By then you have deposited 13,500 on top of your 5,000 and earned 1,635.94 in interest, for a balance of 20,135.94.
To reach 10,000 from zero in one year at 6%, you need to save 810.66 a month.
Tips
- Automate the deposit on payday; it is the easiest way to keep to the plan.
- Even a small rate helps over many years, but for goals of a year or two the deposits do most of the work.
- These are estimates, not financial advice; real rates can change during the period.