Future value

Future value is what an amount of money will be worth at a chosen date in the future, once a rate of growth has been applied to it over time. It is the number a compound interest calculation is solving for: start with a sum today, apply a growth rate over a number of years, and future value tells you what that sum becomes. The idea works whether the growth comes from a savings account, an investment, or any other arrangement where money earns more money over time.

In practice

Future value is the FV in the compound interest formula, and the figure most savings and investment calculators are built to produce. Enter a principal, a rate and a length of time, and the calculator’s headline output is the future value: the single number that answers “what will this be worth later.” Because it depends on a rate of growth continuing as assumed, future value is a projection, not a guarantee. Change the rate, the time period, or how often growth is added, and it changes with them.

Not to be confused with

Present value is the same relationship read backwards: instead of asking what a sum today will become in the future, it asks what a future sum is worth today. Future value and present value describe the same growth relationship from opposite ends.

Real value is future value adjusted for inflation. A future value figure tells you the number of euro you will have; a real value figure tells you what that money will actually buy once rising prices are accounted for. A future value can grow while its real value stands still, or even falls, if inflation outpaces growth.