Future value (FV)

Future value answers a simple question: how much will I have if I let today's money work? Money grows while you wait, so there is more of it at the end than at the start.

It is the forward-looking view. You know the amount today and you are looking for what becomes of it.

The formula

$$FV = PV \times (1 + r)^{t}$$

• $FV$: the future value, that is the amount at the end
• $PV$: today's amount, the one you put in
• $r$: the annual interest rate as a decimal
• $t$: the number of years

The exponent above the bracket matters. It means the growth is applied over and over, each time to an amount that has already grown, that is compound interest.

FV and PV are two sides of the same coin

Future value has an exact mirror: present value. They differ only in which way through time you are looking:

• Future value: "What will today's amount be worth in the future?" You know today and are looking for the future.
• Present value: "What is a future amount worth today?" You know the future and are looking for today.

The formula is the same one; you multiply by it in one direction and divide by it in the other.

What it means in practice

You calculate a future value whenever you plan ahead. How much will I have in retirement if I put aside €200 a month? How much will what is in the savings account grow to by the time a child turns eighteen?

Mind one thing: a future value is in future prices. €13,382 in five years does not have today's purchasing power: inflation sees to that. To know what it will actually buy, look at the real return.

Try it yourself

Put your own amount, rate and number of years into the compound interest calculator. It shows not just the final figure but the year-by-year breakdown, and how much of it came from your contributions and how much from the compounding itself.