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Formula:
The primary formula used for calculating the future value of a savings plan with regular contributions and an initial amount is:
FV = PV × (1 + r)n + PMT × [((1 + r)n - 1) / r]
Where:
- FV = Future Value (total savings at the end)
- PV = Present Value (your initial deposit/savings)
- PMT = Payment (your regular monthly contribution)
- r = Interest rate per period (Annual Interest Rate / 12 for monthly compounding)
- n = Total number of periods (Savings Duration in Years × 12 for monthly compounding)