Savings Formula

[fisicx]

It's a compound interest question but one where a deposit is made each month.

I need the formula to calculate the return on a monthly investment.

eg: invest £X for Yyears/month at Z%

The standard compound interest formula doesn't work because it only work on the initial deposit.

Anyone in the world of sums know the formula?

 

[MBE2017]

This of any help?

https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

Online calc

 

[AllUpHere]

You can manage an undergrad degree in Physics, but can't work this out. I must say, you are not the man I thought you were.

 

[gpietersz]

I suspect what you are looking for is IRR: https://moneyterms.co.uk/irr/

Is that enough to let you implement it with a spreadsheet?

 

[mattk]

Excel has a formula to calculate future value, called FV

It accepts interest rate, number of payments, payment amounts and deposit

Just remember your rate will likely be

The standard compound interest formula doesn't work because it only work on the initial deposit.

Anyone in the world of sums know the formula?

Use A = P ( 1+r ) and loop for the number of periods.

Remember, if your rate is annual and your payments are monthly, then you need to divide r by 12.

For example, if you are paying in £100 per month at 5% annual interest for 12 months.

100 * (1+(0.05/12) = 100.42 <- end of month one

(100.42 + 100) * (1+(0.05/12) = 201.25 <- end of month two

and so on up to end of month 12.

 

[fisicx]

Thanks but this is what I want to do:

https://www.calculators.org/savings/monthly.php
https://www.bankier.pl/narzedzia/systematyczne-oszczedzanie

I found this:

https://smallbusiness.chron.com/formula-future-value-annuity-5028.html

But the results don't match. They are out by a small but significant amount.

 

[Financial-Modeller]

That small but significant amount may be down to timing of payments; a series of regular payments made on the last day of every month will produce a different final value to the same series of payments made on the first day of the month.

 

[fisicx]

I agree. But this is for an online calculator. The client wants to replicate the Polish calculator but I can't find a formula that works. Using the one I found the difference is about 1000złoty which is a bit too much.

I've tried adjusting all sorts of parameters but to no avail.

 

[Financial-Modeller]

There is also an error in the Polish calculator linked. It's only a couple of couple of cents out on 1000 pcm over three years, but that may also be contributing to the difference that you identified @fisicx

It's a bit cumbersome to do this with a single formula using Excel or similar, but would a Python formula work for your intended purpose / application?

 

[fisicx]

It's actually javascript I'll be using as the principal, term and interest rate will all be set using sliders.

I can programme the formula - only takes a few minutes, I just wanted to make sure I'm using the right one.

Probably this:

FVA = PMT x [( (1+i)^n - 1) / i ]

FVA = Future annuity
PMT = monthly payment
i = interest rate per period/100
n = number of periods

 

[Financial-Modeller]

To replicate the Polish calculator methodology with payments at the beginning of the period you need to use this version of what you had:

FVA = PMT x (((1 + r/n)^(n x t) - 1) ÷ (r/n)) × (1+r/n)

 

[fisicx]

That all worked:

https://demo.loanpaymentplugin.com/savings/

Just need them to confirm a few things and I can finish off the plugin

 

[Financial-Modeller]

I appreciate that the link 30 mins ago is a demo/draft but its giving different answers to the site linked to yesterday.

 

[fisicx]

Sorry, just been doing some fiddling so you can switch between years and months.