Glossary
Future value
Definition
Future value is what an amount, plus any regular deposits, grows to at an assumed rate over a period. $10,000 at 6% compounded yearly is about $17,908 after 10 years. It's the arithmetic behind savings projections.
How future value works
Future value depends on rate, time, deposits and compounding frequency. It's in nominal dollars unless adjusted for inflation.
Projections presented by advisers can be hypothetical performance.
Why it matters to a firm
It makes compounding concrete for clients.
Questions about future value
Does it include inflation?
Not unless adjusted.
Does compounding frequency matter?
A little.
Is it guaranteed?
No.
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Related terms: Present value · Compound interest
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