1. What is Hugh Chou's Savings Tool?

This calculator uses the future value of a series formula to determine how much your regular savings will grow over time with compound interest. It's particularly useful for retirement planning and long-term savings goals.

2. How Does the Calculator Work?

The calculator uses the future value of a series formula:

Where:

• \( FV \) — Future Value (USD)
• \( PMT \) — Periodic payment amount (USD)
• \( r \) — Interest rate per period (decimal)
• \( n \) — Number of periods (unitless)

Explanation: This formula calculates how much a series of equal payments will be worth in the future when invested at a constant interest rate.

3. Importance of Savings Calculation

Details: Understanding the future value of your savings helps with financial planning, setting realistic goals, and making informed decisions about investment strategies.

4. Using the Calculator

Tips: Enter periodic payment in USD, interest rate as a decimal (e.g., 0.05 for 5%), and number of periods. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What time period should I use?
A: The period should match your payment frequency. For monthly payments, use monthly rate and number of months.

Q2: How do I convert annual rate to periodic rate?
A: Divide annual rate by number of periods per year. For monthly, divide by 12.

Q3: Does this account for taxes or fees?
A: No, this calculates gross future value before taxes or investment fees.

Q4: What if my payments increase over time?
A: This calculator assumes constant payments. For increasing payments, you'd need a more complex formula.

Q5: Can I use this for loan calculations?
A: This formula is for savings. Loans typically use a similar but slightly different future value formula.