How to determine monthly deposits to reach a financial goal

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In summary, the conversation discusses a problem regarding savings accounts and determining the necessary monthly deposits to reach a savings goal. The account has no initial balance and compounds interest at a rate of 0.5% per month, with a savings goal of 96,000 over 20 years. The variables a_0, a_240, r, and b are mentioned, with the question being how to calculate the value of b. Input and assistance are requested.
  • #1
ank91901
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Hi everybody. I'm trying to figure out a somewhat confusing problem about savings accounts.
I want to save 96,000 over the span of 20 years (or 240 months). At the moment there is no money in the account. My account compounds interest monthly at a rate of .5%. How do I determine the amount of money I should be setting back every month to reach my goal?
In sum:
a_0=0
a_240= 96000
r=0.5%=.005
b=monthly deposits, so, how do I find b?

Any input would be greatly appreciated.
 
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  • #2
hi ank91901! :wink:

show us what you've tried and where you're stuck, and then we'll know how to help! :smile:
 

FAQ: How to determine monthly deposits to reach a financial goal

How do I calculate the amount of monthly deposits needed to reach a financial goal?

To determine the monthly deposits needed to reach a financial goal, you will need to know the following information: your financial goal, the time frame in which you want to reach the goal, the interest rate of your savings account, and the compounding frequency. You can use a financial calculator or an online savings goal calculator to input this information and determine the amount of monthly deposits needed.

Does the interest rate of my savings account impact the amount of monthly deposits needed?

Yes, the interest rate of your savings account will impact the amount of monthly deposits needed to reach your financial goal. A higher interest rate means you will need to deposit less money each month, while a lower interest rate will require higher monthly deposits to reach your goal in the desired time frame.

How does the compounding frequency affect the amount of monthly deposits?

The compounding frequency refers to how often the interest on your savings is calculated and added to your account. The more frequently interest is compounded, the less you will need to deposit each month to reach your financial goal. This is because your money will be earning more interest over time with a higher compounding frequency.

Is it better to make larger monthly deposits or more frequent deposits?

It ultimately depends on your financial situation and personal preferences. Making larger monthly deposits will allow you to reach your financial goal faster, while making more frequent deposits can help you stay on track with your savings and potentially earn more interest. Consider your budget and financial goals when deciding which approach is best for you.

Can I adjust my monthly deposits if my financial situation changes?

Yes, you can adjust your monthly deposits if your financial situation changes. It is important to regularly review your progress towards your financial goal and make adjustments as needed. You may need to increase or decrease your monthly deposits based on changes in your income, expenses, or the interest rate of your savings account.

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