What is FV and How Does It Affect Me?

FV or the Future Value of money is an estimate of how much value the money you have today will have in the future. As every body knows, the prices of goods change always. Typically, your one thousand pesos can buy more goods today than it will buy in the future. Prices of goods increase from year to year and the government tracks this and calls it the inflation rate. Thus, if your money does not grow to keep up with inflation, it will continue to decrease in value for the long term.

Let’s get into the nitty-gritty details. With inflation rate at around 5% for example, your P100,000 will have a future value as follows:

Year Value
0 100,000.00
1 95,238.10
2 90,702.95
3 86,383.76
4 82,270.25
5 78,352.62
6 74,621.54
7 71,068.13
8 67,683.94
9 64,460.89
10 61,391.33
11 58,467.93
12 55,683.74
13 53,032.14
14 50,506.80
15 48,101.71
16 45,811.15
17 43,629.67
18 41,552.07
19 39,573.40
20 37,688.95

The formula is:

(Future Value) = (Present Value) / ((1 + (Interest Rate))^(Year))

So for example, the value of 100,000 after 20 years at 5% inflation rate would be:

FV = 100,000 / ((1 + .05)^20) = P37,688.95

So what does this tell us? It simply tells us that we need a financial plan that will protect our money from inflation. If you do not plan ahead, you’ll wind up losing your hard-earned money.

0 comments ↓

There are no comments yet...Kick things off by filling out the form below.

Leave a Comment