Formula and example
How it is calculated
Payment = max(0, (target − initial balance × (1+i)ⁿ) × i / ((1+i)ⁿ−1)), where i = annual percentage rate / 1,200
Worked example
A €20,000 target with €5,000 already saved and 60 months at zero interest requires €250 per month.
Things to check
- Contributions are made at the end of each month. A constant interest rate is an assumption. If the initial balance alone reaches the target, the required additional contribution is zero. With zero interest, divide the remaining shortfall by the number of months.
- Use one currency consistently. Examples use euros; the calculation works with any currency.