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Simple English definitions for legal terms
future value
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A quick definition of future value:
Future value refers to the amount of money that a present sum or a series of payments will be worth at a specific interest rate in the future. It's like predicting how much money you will have if you save or invest it for a certain amount of time. For example, if you save $100 today and the interest rate is 5%, the future value of that money in one year will be $105. Future value helps people plan for their financial future and make smart decisions about saving and investing.A more thorough explanation:
Definition: Future value is the value of a sum of money or a series of payments at a specific interest rate at some point in the future.
For example, if you invest $100 today at an interest rate of 5%, the future value of that investment after one year would be $105.25. This means that if you leave the $100 invested for one year, it will be worth $105.25 at the end of the year.
Another example is if you make monthly payments of $100 into a savings account that earns 3% interest per year. After 5 years, the future value of your payments would be $6,116. This means that if you continue to make monthly payments of $100 for 5 years, you will have $6,116 in your savings account at the end of the 5 years.
Future value is important in financial planning because it helps you understand how much your money will be worth in the future and how much you need to save or invest to reach your financial goals.