 Hello everyone and welcome back to a new video. If you're new to the channel, don't forget to subscribe So you're notified of all our future videos Also, if you do enjoy this video and it gives you either the answer to your question or teaches you something new Again, don't forget to give it a like and it'd be greatly appreciated by us. So the topic of today's Today's video is to show you how you can calculate the future value using the FB function available in XL the purpose of the function it allows us to enter for Piece of information and what it will do it will allow us to again equate what the future monetary value of something will be So to give you an example I'll show you what I've got on the screen at the moment talking through it And then obviously you can we will then go through obviously how you actually input this into your XL So what we've got is we can see our starting balance is a hundred pounds. So let's just Wear applicable Copy our formatting so it makes a bit more sense. So just do it to there Okay, so we can see our starting balance is a hundred pound and it's going to get rid of that one to start So you can see our starting balance is a hundred pound If we have an interest rate so of five percent. So this is our interest rate we're going to be earning on our hundred pounds starting balance every year and we Invest that money at five percent for one year our future value will be a hundred and five pounds and twelve pints So what this basically does it equates what of five percent is of our hundred pounds? And it works out based on obviously your pay or earning interest every month throughout that year So that's why you can see our value is slightly just over the hundred and five Pound because obviously we know five percent of a hundred pounds is five pounds and we can see we've got some extra change there Totalling twelve p if we had to change increase our years You can see that if you put in here five years that how that impacts our future value I've gotten really tense it now goes up to a hundred eight hundred twenty eight pounds Sorry, and alternatively we could change our interest rate So we could maybe change this to seven percent and then we can see what that value would be The main purpose of this is whether you're investing your money or you're just trying to work out What something could be compounded to in the future then this again is a great function that allows you to see what that value would be Most importantly really for like comparing obviously different interest rates and also comparing the differences in years So we can see again if we were to go put ten percent into our interest rate how that would impact it as well The monthly contribution bit what we've left out. So let's just go back to some simple numbers We'll leave it at ten percent. We'll put it back to one year So we can see our future value at the moment would be a hundred and ten forty seven So we can enter in here a monthly contribution. So this is going to be how much Additional we're going to be contributing every month to our starting balance of a hundred pounds. So let's say five pounds So obviously we've got a starting balance of a hundred if we had to add five pounds to this starting balance every month 12 months in the year that's 60 pound by default without any interest We would then have a grand total of a hundred and sixty pound But because we're going to be also earning interest every month at ten percent for the whole year You can see what our future value actually turns out to be So again, this is another way you can do it Alternatively, you can obviously change this so you could put maybe ten pound contributions a month or so on and so forth Doesn't seem a great deal of interest when you look at one year, but let's say we're going to really scale this up and look at over 20 years And interestingly enough if I get rid of that you can see that if you had a hundred pounds And you didn't put any other contribution to this and you just made ten percent a year Your initial hundred pounds would turn into seven hundred thirty two pounds after 20 years So quite interesting there But again by putting in the contribution you can just see how that future value is really impacted If you start adding five pound a month and you can see it's now gone up to Four and a half thousand pounds just from obviously sparing at five pound So you can really see the the purpose and the benefit of building a template like this is allows you to really juggle the numbers and play around So you can get to that I desire to really say your future value that you're after So what I'll do is just clear these values down and then we'll start afresh by putting them in and show you how it's done Okay, so we're now got a blank template. Obviously you can recreate this yourself There's nothing more going on here other than a bit of formatting and a bit of a summary at the top here So the first thing we need to do is to enter some basic Numbers just helps to know that the function is working properly So I always start with a starting balance of 100 just a nice easy round number monthly contributions we can leave blank And the interest I'll set at 10 and you can just see I've done some formatting in these cells to get the Powers in the 10 and we'll just go for one year So the first thing we'll do is we do our equal sign and we enter the val letters fv What stands for future value open our brackets and we can see we have an on-screen prompt for us to use So the first thing we have and what we have to do is Ask for the rate. So the rate refers to the interest rate So all I need to do is select the interest rate here and what we're actually going to do and it kind of gets a bit complicated but Just just go with it is we want to calculate interest Every month. So what will happen is it will say 100 pounds Obviously in the first month we're going to earn x percent and that will gradually build up throughout the course of the year So as a whole year, we're going to earn like an apr of 10 percent So all we do is we go divided by 12 So we can see that we are going to earn. What's that going to be? 0.83 of a percent each month if my math is correct there quickly So that's what it does. So that's how I can Calculate so over the course of year this particularly comes in obviously not handy But comes in importance when you're doing monthly contributions because it's obviously going to work out how much Each contribution should account for in terms of the interest So once we've done that we just do a comma And this time we're going to go and select our years. So the end per so sounds a bit of a hard one to remember But just needs to go to your years That's going to be one and what we're going to do here is we now times this number by 12 So it seems a bit confusion while you need to divide in times In essence, what's going to happen is it's going to divide to see see seven by 12. So we get our as we said point zero or point yet point zero 0.83 percent sorry each month and then what this is then basically saying is there going to be there's this many Calculation intervals to put it bluntly in our period or more importantly It just tells us that obviously rather than just being one There's 12 months within our current calculation and each month has to obviously be times or looks an interest rate of that 0.83 percent So again, I hope that sounds clear There's lots of information you can find when you just google this function online. So if you are getting confused at all point That's where you can go Alternatively if you follow this instruction, um as i'm actually putting in you'll have no problems at all Going to common. I mean get our PMT. So what this refers to is our monthly contribution So what we're going to do is just select uh c6 because that's just what's going to contain our monthly contribution One more comma and then we're going to select our starting balance. What is this pv option here? So in essence you don't pv is an optional Entry point. You could just leave this blank. So if you just wanted to know, okay, forget starting balance I just want to know if I do monthly contributions at an x percentage increase over a number of years What would the value be? But the start and balance I personally like using I think it's quite helpful to have Obviously, you could just put it at zero if you don't want to have a starting balance of a hundred So I just always include it in my in my function when I'm using future value And the type at the end there not going to be looking at that in this example But again, if you have a google of the fv function, you'll find obviously no end of tutorials What'll go in more depth and hopefully keep it simple for understanding then I will probably be able to get across in this video So once you've entered those four parameters close our brackets and hit enter And this is particularly good why this template and this order I've got everything in is particularly useful because it allows you to hopefully just jump across and obviously just follow this video along as well Now you can see by default it gives us a negative number And that does that because it's in including all these values and it's looking at it as like a diminishing Amount rather than an increasing amount So what I do in mine again is I just simply go into these last two parameters So c6 will munch contribution and just enter a negative sign And I just do another negative sign in front of c5. What's my starting balance? And then this way it gives me a positive so I can see what my starting balance is going to be increased to In terms of the future So again to follow this along that's the best way to do And that is all you need to do and once you've got to this point You can apply the numbers as much as you like and as I touched on earlier about starting balance If you did want to have it zero all you've got to do is leave that blank And then all will happen now is you can then put your monthly contributions to whatever you desire So maybe it's 10 pound and you can see that how that 10 pound is going to accumulate over a period of time and again probably years and so forth Again to talk about in terms of the finance aspect of this It's a really useful tool again to help demonstrate what compound interest is In terms of compound interest if you're not sure about it Once again, we've mentioned it a few times already have a google if you're not sure about what compound interest is But compound interest is the real power of how your money grows when it's being invested So if you've got a hundred pound and you make five percent on that in the first year You're going to end up with a hundred and five pounds So next year you're not going to have when you go into your second year rather than again earning only five percent on a hundred pound You're now going to be earning five percent on a hundred and five pounds So you're now going to start earning interest on your interest And this is where this calculator comes calculator comes in that shows you the true benefit of using it And just to do an example for that seems I've touched on the subject If I put interest rate to zero And we look at 10 years And we say okay, we're going to have a starting balance of a hundred pounds You can see that well, okay a hundred pound and we're going to contribute five pound a month So nothing too new significant and we can see that after 10 years Our money is going to be worth or we're going to amass the pot of seven hundred pounds from simply initially saving a hundred pounds And then adding five pound every month. You see it gets to seven hundred pounds If we incorporate interest into this and let's just put this seven hundred just to the side so you can reference it in a second seven hundred So there's our starting one. So if we now add interest, so even just five percent You can see that our money has increased by an additional 241 pound and that's taken no more input from us or required us to contribute no more money But obviously because we've got that five percent interest was being compounded every single one of those 10 years It really increases the money that we're earning And again, if we even go up to like seven percent and I believe seven percent is actually the average stock market return Over a long period of time you can see again If you end Seven percent on average over these 10 years because obviously one of those years you might earn more interest than that or less You can see that actually you're now going to make an additional 300 pound just from including interest in that So apologies at the end there and actually throughout the video I've sidetracked a bit and gone into the actual more The benefit of interest and sort of touching on investing But the main purpose of the video was to show you how you can use that Or introduce you to a new function in excel And also if this is something you've been trying to look into or you've been trying to work out with Many little miniature formulas in excel This is the function to use if you want to work out your future value So if you enjoyed the video, please do give it a like Not only is it very beneficial to the youtube algorithm algorithm and boosting our channel It also shows me the content that you like and anything that you want to see more of Lastly, if you haven't already, please do subscribe to the channel Lots of videos on the channel already, but there's going to be lots more coming out So you don't want to make sure you miss those and also hit that bell notification button again So you're doubly notified as soon as a new video comes out So thank you very much for watching and we shall see you in the next video Before you go, don't forget to check out the other videos on our channel You'll see everything from other functions and formulas through to tips and tricks We've also created some playlists so you can see these categorized together So make sure you check those out and get all those useful information And obviously as always don't forget to subscribe and hit that bell notification button