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Future Value Formula:
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The Future Value (FV) of money calculates how much a present amount will be worth in the future when accounting for inflation. It demonstrates the time value of money - the concept that money available now is worth more than the same amount in the future due to its potential earning capacity.
The calculator uses the Future Value formula:
Where:
Explanation: The formula accounts for compound inflation over time, showing how purchasing power decreases as prices rise.
Details: Understanding future value helps with financial planning, retirement savings, investment decisions, and long-term budgeting by accounting for inflation's impact on purchasing power.
Tips: Enter present value in dollars, inflation rate as a decimal (e.g., 0.03 for 3%), and time period in years. All values must be valid (PV > 0, inflation ≥ 0, years > 0).
Q1: How is this different from compound interest?
A: While similar in formula, this calculates loss of purchasing power due to inflation rather than growth from interest. For investment growth, you'd use the interest rate instead of inflation.
Q2: What's a typical inflation rate?
A: Historically, average inflation is about 2-3% annually in developed countries, though it can vary significantly by year and country.
Q3: Why calculate future value in today's dollars?
A: This shows equivalent purchasing power - what amount in the future would buy the same as your present amount today.
Q4: Can I use this for salary planning?
A: Yes, it helps determine how much your salary needs to increase to maintain purchasing power against inflation.
Q5: How accurate are these projections?
A: They're estimates assuming constant inflation, which rarely happens. Actual future values may differ based on changing economic conditions.