After seeing our decimated food budget on the first Friday of the month, I started thinking about our savings. Peter cancelled his AFLAC coverage and diverted that money into savings. I began to get curious about what will happen with it at the end of the year, so I started hunting up some compound interest calculators online. After all, it’d been high school since I’d computed compound interest and couldn’t remember the formulas.
The search was frustrating at first, because most compound interest calculators assume you’re making one initial deposit and letting your money meditate for a set period of time. I did find one, though, that calculates final amount after making deposits over a period of time. You can find it here. Or, if you’re as much a geek as I am and want to run the numbers yourself, you can use this formula for weekly deposits, interest compounded daily:
|V = D(1 + r/364)7[(1 + r/364)364n – 1]/[(1 + r/364)7 – 1]|
D = Initial deposit; r = interest rate; n = period of time in years; V = final amount
Using this formula and considering the current low interest rates on savings accounts, it’ll take forever to accumulate anything of significance, but at least that money will do more for us than that same money given to AFLAC. Our savings will grow like children – a few spurts, but mostly very gradual, slow growth that we will only see as we look back on it. (I will say, though, that I’m seriously hoping the interest rates will improve beginning next year at this time.)
What’s your favorite method of saving money for emergencies?
- Compound Interest aka Wealth Builder (adamsylvester.wordpress.com)
- Compound Interest, Compound Opportunity (thesimpledollar.com)
- When Should You Start Saving? Now. (ally.com)