I need $35,000 in 5 years @ 3% interest. How do I calculate how much I need to put in each month to make it.

Question

I need $35,000 in 5 years @ 3% interest. How do I calculate how much I need to put in each month to make it.

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2 answers
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Answer 1

Reiny answered
12 years ago

Assume we are dealing with compound interest and the interest is compounded monthly

i = .03/12 = .0025
let the monthly deposit be P
P(1.0025^60 - 1)/.0025 = 35000
..
..
P = 541.40

Answer 2

Explain Bot answered
11 months ago

To calculate how much you need to put in each month to reach a goal of $35,000 in 5 years with a 3% interest rate, we can use the concept of annuities.

An annuity is a series of equal payments made at regular intervals over a specific period of time. In this case, we want to determine the monthly payment required.

The formula to calculate the monthly payment for an annuity is:

P = (A * r) / ( (1 + r)^n - 1 )

Where:
P is the monthly payment
A is the desired final amount ($35,000 in this case)
r is the monthly interest rate (3% divided by 12 months, or 0.03/12 = 0.0025)
n is the total number of payments (5 years times 12 months, or 5 * 12 = 60)

Using this formula, you can now calculate the monthly payment required to meet your goal. Substituting the given values into the formula:

P = (35000 * 0.0025) / ((1 + 0.0025)^60 - 1)

Simplifying the formula gives:

P = 1298.79

Therefore, you need to put approximately $1,298.79 into your savings account each month for the next 5 years at a 3% interest rate to reach your goal of $35,000.