Savings Goal calculator helps you to calculate how much you need to invest monthly to save the desired amount in a given time period with compound interest on top.
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Savings Goal Formula with Compound Interest rate
We can use the same formula that we have used to calculate the total savings when you invest an initial amount and add a recurring deposit with Compound Interest on top.
Compound Interest Formula with Recurring Deposits
A = Savings total at the end of tenure.
P = Initial Deposit
Q = Monthly recurring deposit that she needs to invest
r = Annual Interest rate
n = Compound interest deposition frequency
(Monthly = 12, Quarterly = 4, Half yearly = 2, Annually = 1, daily = 365)
t = time period in years
Example of Compound interest calculation
Ms.Vaahini would like to save a total of ₹500000 after five years. She has an amount of ₹100,000 rupees for the initial depositions. The interest rate is 5% annually. She wants to calculate how much she has to invest monthly in those five years to achieve her savings goal.
A = ₹500,000
P = ₹100,000
r = 5% = 0.05
n = 12
t = 5
500000 = [100000x(1+(0.05/12))^(5×12)] + [(12/12) x (Q)x(((1+(0.05/12))^(5×12))-1)/(0.05/12)]
500000 = [100000x(1.28335868)] + [(1 x Qx(68.00608284)]
[Q x68.00608] = 500000 – [128335.86]
Q = 371664.14/68.00608
Q = 5365.16
Vahini needs to invest ₹5365 rupees each month for 5 years to have a savings goal of ₹500000 rupees.
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