How the payoff time is calculated
With no interest, reaching a goal is just the goal divided by the monthly deposit. With interest, each deposit starts compounding as soon as it's made, so the balance grows faster than the raw sum of deposits — this uses the standard future-value-of-an-annuity formula, solved for the number of months.
- i — monthly interest rate (decimal)
- goal — the target savings amount
- monthly — the fixed amount deposited each month
More detail
Why interest shortens the timeline
Every deposit you make keeps earning interest for the months that follow, so later deposits do less work than earlier ones. Over a long enough horizon, that compounding effect means you reach the goal in fewer months — and pay in less total money — than a plain sum-of-deposits calculation would suggest.
Quick check. At 0% interest, "Interest earned" is 0 and "Total deposited" is always at least the goal — it equals the goal exactly only when the goal divides evenly by your monthly deposit. Set the rate to 0% and confirm that relationship holds before you trust a result with interest applied.
Frequently asked questions
How much does interest actually speed things up?
It depends on the rate and the timeline — over a short payoff period (a year or two) the effect is modest, but over five or more years compounding can meaningfully cut both the months needed and the total amount deposited. Try the same goal and monthly deposit with the rate set to 0% first, then compare.
Does this assume deposits happen at the start or end of each month?
End of each month (an ordinary annuity), which is the standard and slightly more conservative assumption — deposits made at the start of the month would compound for one extra period each and reach the goal marginally faster.
Why round the months up instead of showing a decimal?
You can only make a whole number of monthly deposits, so the calculator rounds up to the next full month to guarantee the goal is actually reached — rounding down would leave the balance just short of the target.
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