Compound Savings Calculator Step By Step Guide With Examples

Compound Savings Calculator

Individuals who are employed try to save the funds after their expenditure and requirements, and the residual, if invested with compounding magic then, which figure will be after a couple of periods, is calculated by this compound savings calculator.

About Compound Savings Calculator

The formula for calculating Compound InterestCalculating Compound InterestCompound interest is the interest charged on the sum of the principal amount and the total interest amassed on it so far. It plays a crucial role in generating higher rewards from an investment.read more is:

Compound Savings Calculator

A * ( 1 + i )nF + I * ( ( 1 + i )nF– 1 / i )

A is the initial Principal.
i is the interest rate.
n is the number of periods for which investment is to be made.
F is the number of compounding period which could be daily, annually, semi-annually, monthly or quarterly.
I is the regular savings fixed amount.

Where,

A is the initial Principali is the interest rateF is the number of compoundingCompoundingCompounding is a method of investing in which the income generated by an investment is reinvested, and the new principal amount is increased by the amount of income reinvested. Depending on the time period of deposit, interest is added to the principal amount.read more periods which could be daily, annually, semi-annually, monthly or quarterly.n is the number of periods for which investment is to be made.I is the regular savings fixed amount.

This calculator calculates the amount received at maturity when the individual saves a certain amount and invests a fixed amount periodically. Some products could pay interest annually, monthly, quarterly, or semi-annually. Accordingly, this calculator will calculate the maturity amount the individual shall receive at the time of maturity. In this way, an individual will know about the amount he shall receive from the amount he has saved. If the individual compares various products, he can use this calculator to identify which one is paying better.

How to Calculate Using Compound Savings Calculator?

One needs to follow the below steps in order to calculate the amount for Retirement.

Step #1 – First, calculate the monthly savings an individual can make.

Step #2 – Determine the rate of interest that can be applied to the investment.

Step #3 – Now, Compound the initial amount either monthly, quarterly, semi-annually, or annually by the interest rate until the maturity period, as the case may be.

Step #4 – We now need to determine the future value of the monthly savings amount with the same rate of interest used to calculate an initial investment’s maturity value.

Step #5 – Now, we can take a total of values arrived at in steps three and step 4, which shall be the future value of the savings invested.

Examples

Example #1

Kushal has been working with a startup companyStartup CompanyA startup can be expressed as a business in its initial phases, searching for a practical and scalable model. Often, these companies launch and market a unique idea, product, or service that in some way offers fresh benefits to the society. Reliable models aid in the rapid growth of the business.read more and earning quite well. Recently Mr. Kushal opened an account wherein he initially deposited $4,000, and he intends to save monthly $100 and deposit in this account. This account pays a 1.25% rate of interest which is compounded monthlyInterest Which Is Compounded MonthlyMonthly compound interest refers to the compounding of interest every month, which implies that the compounding interest is charged both on the principal and the accumulated interest.read more. He intends to retain the same amount of savings until 20 years. Based on the given information, you are required to calculate the amount to be received at maturity.

Solution:

The following information is given: A is 4,000, and Interest Rate is 1.25%, which has to be divided by 12, which will be 0.10%, frequency is 12, and n is 20 as it’s compounding monthly.

The formula for calculating Compound Interest is:

= $4,000 ( 1 + 0.10% )2012 + $100 ((1 + 0.10% )2012 – 1) / 0.10%= $32,385.84

The income earned on this product will be $32,385.84 less (4000 + (100 * 12* 20)) which is $32,385.84 less $28,000 which is $4,385.84

Example #2

Booker has started saving $1200 per quarter and intends to invest the amount in an account which shall pay the interest rate of 3% per annum compounded quarterly. He intends to invest for ten years.

Based on the given information, you are required to calculate the amount to be received at maturity.

The following information is given: A is 0, Interest Rate will be interesting is 3.00%, which, when divided by 4, will yield us 0.75%, frequency is 4, and n is ten as itscompounding quarterlyCompounding QuarterlyThe compounding quarterly formula depicts the total interest an investor can earn on investment or financial product if the interest is payable quarterly and reinvested in the scheme. It considers the principal amount, quarterly compounded rate of interest and the number of periods for computation.read more.

Here Mr. Booker saves $1200 per quarter.

The formula for calculating compound interest is:

= 0 * ( 1 + 0.75% )104 + $1200 * ( (1 + 0.75% )104 – 1) /0.75%= 55,735.78

The income earned on this product will be $ 55,735.78 less (1200 * 4 * 10) which is $55,735.78 less $48,000 which is $7,735.78.

Conclusion

A compound savings calculator can be used to calculate the maturity amount of the savings that the individual has invested. He can know from the same how much he would be making in the future, assuming he doesn’t withdraw any amount and could decide if it meets the goal or if he needs to invest more or further can reduce the same.