So far, you've saved $50; you have $5,000 plus interest for your wedding; and you have $10,000 set aside for your future wish list. This is really starting to look like a plan!
If you know you're getting married, maybe a house would be a good thing to start saving for as well! At the beginning of this lesson, we asked you to predict whether letting $9,000 grow at 4% interest for 10 years would get you the $11,000 you need for a down payment on a house. Do you remember what your guess was?
Now you have the knowledge to do more than guess! To know the answer, you'll need to use the calculator to determine the future value of $9,000.
Review the scenario again and then answer the question that follows.
This Is Your Life: You'd Like to Buy a House Some Day…
You'd like to buy a house some day. Say you've graduated from college and, in your first year of work, you receive a $9,000 bonus. If you put that $9,000 in the bank when you are 25 and save it for 10 years at 3% interest, how much will you have by the time you are 35? If you need $11,000 for a down payment on your first house, will you have enough?
Use the calculator to answer the question below. Choose the appropriate formula, enter values for each variable, and click Calculate.
That's incorrect. The future value in this situation is $12,095.25. You will have plenty for your $11,000 down payment and even enough for a lawn mower and maybe a few other household supplies! The correct variable inputs are as follows:
- PV=$9,000. This is the amount of money we are starting off with.
- i=0.03. This is our interest rate.
- n=10. This is the number of years we plan to save. You don't plan to put the money into a savings account until you are 25 and you hope to save it until you are 35.
Enter the correct values for the variables and try your calculation again.