Investing in PPF is a great option if you're a new employee or a worried parent looking to set aside money for your child's future. However, it is always best to use a PPF calculator to assess your returns prior to making an investment.
Here, we'll walk you through using a PPF calculator and explain its advantages for your long-term financial objectives.
Saving money is often the first thing that comes to mind when you consider managing your finances. Though there are many ways to preserve your money, some people always choose to put their money in a risk-free deposit that will yield guaranteed returns. Investing in a Public Provident Fund, or PPF, program is an excellent way to achieve the same goal.
With a PPF account, you can invest your hard-earned money for a predetermined period of time, usually very long. In addition, the interest rate on this investment is higher than that of other deposit plans that banks or NBFCs provide.
Depending on your financial situation, you can make regular contributions to your PPF account. When the account's defined tenure—typically 15 years—comes to an end, you'll receive a significant return that you can use to further your financial goals.
An effective web tool for estimating the growth of your Public Provident Fund (PPF) investment over a given period of time is a PPF calculator. PPF is a government-backed savings program that has a 15-year lock-in requirement and provides higher rates than other options like fixed deposits. Moreover, it is a powerful tool that you can use to reduce your professional tax liabilities.
When you use a PPF calculator, it uses the PPF formula to determine the total value of your investment after a predetermined number of years, taking into account the interest rate on your PPF account. Interestingly, retirement planning can also be facilitated with a PPF account calculator. Because PPF deposits have a 15-year lock-in period, they offer a great way to save for retirement in a disciplined manner.
If you already know what your retirement goal is, you may use the calculator to see how much you'll need to contribute over a given time period to reach it. However, it's important to remember that the maximum yearly investment to a PPF is ₹1.5 lakh.
A PPF calculator primarily uses a mathematical formula to determine the maturity value and interest that will be earned on the invested amount. It's incredibly easy to use a PPF interest calculator. The majority of online calculators provide an intuitive user interface that makes them simple to use for both novice and expert users.
Only a few inputs must be entered in order to determine your interest rate and return amount. However, keep in mind that if you deposit money into a PPF account on April 1st, the interest you earn will be computed for the current fiscal year.
Generally, a PPF interest rate calculator applies the future annuity value calculation algorithm. This indicates that the interest rate on that account and the yearly contribution to the Public Provident Fund are used to determine the future earnings on your investment. Interest rate adjustments by banks or the Post Office often take place at the beginning of the fiscal year.
This is the formula that a PPF calculator uses to determine the return on your PPF deposit.
M = P [ ( { (1 + t) ^ n } - 1 ) / i ]
Here,
It is significant to remember that the annuity component is represented by the portion of the formula that follows P. This gives you the maturity value of your investment when multiplied by the yearly PPF contribution. If you apply this formula to an example, you will understand how to use it.
Let's examine the following example.
Let's say you wish to fund your Public Provident Fund account with ₹1 lakh every year. The account will have a 15-year term with an applicable current interest rate of 7.1%.
Here,
By putting this information in the formula, the result for the maturity value of PPF will be -
M = ₹100,000 [ ( { (1 + 7%) ^ 15 } - 1 ) / 7% ] x (1 + 0.07)
M = ₹27,12,139
You will need to perform the same calculations for various tenures in the event that the interest rate changes.
You must compute the maturity value for ten years at 8% on the deposited amount for the first five years and add it to the maturity value for five years at 7% on the deposited amount for the remaining five years, for example, if the rate is 8% for the first five years and 7% for the subsequent five years.
You can set your PPF calculator to calculate your returns on a monthly basis by entering ÷ 12 for the yearly contributions, if you would like to do so. However, if the calculator is adjusted to annual contributions, the outcome will remain the same.
With its intuitive and self-explanatory UI, the Stable Money PPF return calculator makes it simple to check your investment returns. This is a how-to tutorial that will walk you through using this online calculator to estimate your deposits.
Based on the information you gave, the calculator will determine your PPF account's maturity value automatically.
Understanding the advantages of utilizing the online PPF calculator is crucial before making any investments in a PPF account. Here are a few main advantages that are covered.
Your future is uncertain, and owing to unforeseen life events, long-term planning may occasionally be in vain. To save money for emergencies or simply to realize your long-held goals, you must still strive to save money for the future.
Because PPF returns are better than those of other deposit plans, invest in one now. However, before making such an investment, remember to analyze your returns and make the best financial plans possible by using a PPF calculator.