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Online Investing Hacks by Bonnie Biafore

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Hack #90. Save Up for Something Good

By planning ahead and regularly saving money in the right types of investments, you can have the money you need when you need it.

You just became a proud parent of adorable twin girls. As you try to get them back to sleep in the middle of the night, you begin to think about how much money you’re going to need 18 years from now for college tuition. If you happen to have a pile of money sitting around, you can invest it now and let investment return do most of the savings work for you. If you aren’t so fortunate—join the club—investing a fixed amount each month and letting the nest egg grow until it’s time to take the money out is the next best thing. With Excel functions, you can figure out how big a nest egg you can incubate with the money you can afford each month, or you can calculate how much you need to save each month to achieve a specific amount by your target date.

Determining the results of a savings plan deals with the time value of money. The results you achieve depend on when you put money in, when you plan to take the money out, and the interest rate or investment return you earn. For savings, use one of the following calculations for the time value of money, which are shown with their official financial names so you can impress your friends:

Single-payment compound amount

Calculates how much money you’ll have in the future if you invest a lump sum today at a specific investment rate and let it compound for the number of periods until ...

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