The Savings Income Calculator is a financial tool designed to estimate the future value of your savings, taking into account an initial deposit, regular contributions, and the compound interest earned over time. It helps you visualize your potential wealth growth and understand the impact of consistent saving and investing.
How it Works: The Math Behind the Calculation
The calculator uses the future value of an annuity formula, combined with the future value of a lump sum, to project your total savings. The core components are:
1. Future Value of Initial Deposit (Lump Sum):
This calculates how much your initial deposit will grow based on compound interest:
FV_lump = P * (1 + r)^n
Where:
FV_lump is the Future Value of the initial deposit.
P is the Principal amount (Initial Deposit).
r is the annual interest rate (expressed as a decimal, e.g., 5% becomes 0.05).
n is the number of years.
2. Future Value of Annual Contributions (Annuity):
This calculates the future value of your regular contributions, also benefiting from compound interest:
FV_annuity = C * [((1 + r)^n - 1) / r]
Where:
FV_annuity is the Future Value of the series of contributions.
C is the annual contribution amount.
r is the annual interest rate (as a decimal).
n is the number of years.
Note: If the interest rate (r) is 0, the formula simplifies to FV_annuity = C * n.
3. Total Future Value:
The total projected savings is the sum of the future value of the initial deposit and the future value of the annual contributions:
Total Savings = FV_lump + FV_annuity
4. Total Income Earned:
The total income (interest) earned is the difference between the total future value and all the money you've put in (initial deposit + total contributions):
Total Income = Total Savings - (Initial Deposit + (Annual Contributions * Number of Years))
Use Cases: Who Should Use This Calculator?
Individuals Planning for Retirement: Estimate how much your retirement savings could grow over decades.
Goal-Oriented Savers: Project the future value of savings for major goals like a down payment on a house, a new car, or education.
Young Professionals: Understand the power of starting early and compounding returns on their initial savings and ongoing contributions.
Financial Advisors: Use it as a tool to illustrate potential growth scenarios to clients.
Key Considerations:
Interest Rate Fluctuations: The calculator assumes a constant annual interest rate. In reality, rates can vary.
Inflation: The projected amount is in nominal terms. The purchasing power of money may decrease over time due to inflation.
Taxes: Investment gains may be subject to taxes, which are not factored into this calculation.
Investment Risk: The assumed interest rate represents potential returns, not guaranteed outcomes. Investments carry risk.
By inputting your specific financial details, you can gain valuable insights into the potential growth of your savings and make more informed financial decisions.
function calculateSavingsIncome() {
var initialDeposit = parseFloat(document.getElementById("initialDeposit").value);
var annualContributions = parseFloat(document.getElementById("annualContributions").value);
var annualInterestRatePercent = parseFloat(document.getElementById("annualInterestRate").value);
var numberOfYears = parseFloat(document.getElementById("numberOfYears").value);
var resultSpan = document.getElementById("totalSavingsIncome");
var noResultsDiv = document.getElementById("no-results");
// Clear previous results and error messages
resultSpan.textContent = "–";
noResultsDiv.style.display = 'none';
// Input validation
if (isNaN(initialDeposit) || isNaN(annualContributions) || isNaN(annualInterestRatePercent) || isNaN(numberOfYears) ||
initialDeposit < 0 || annualContributions < 0 || annualInterestRatePercent < 0 || numberOfYears <= 0) {
noResultsDiv.style.display = 'block';
return;
}
var annualInterestRateDecimal = annualInterestRatePercent / 100;
var totalSavings = 0;
var totalContributionsMade = initialDeposit + (annualContributions * numberOfYears);
// Calculate Future Value of Lump Sum
var fvLumpSum = initialDeposit * Math.pow(1 + annualInterestRateDecimal, numberOfYears);
// Calculate Future Value of Annuity
var fvAnnuity = 0;
if (annualInterestRateDecimal === 0) {
fvAnnuity = annualContributions * numberOfYears;
} else {
fvAnnuity = annualContributions * (Math.pow(1 + annualInterestRateDecimal, numberOfYears) – 1) / annualInterestRateDecimal;
}
totalSavings = fvLumpSum + fvAnnuity;
var totalIncomeEarned = totalSavings – totalContributionsMade;
// Format the output nicely
var formattedSavings = totalSavings.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedIncome = totalIncomeEarned.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
resultSpan.innerHTML = `Total Projected Savings: $${formattedSavings}(Estimated Income Earned: $${formattedIncome})`;
}