Public Provident Fund or PPF accounts have emerged as one of the popular means of safeguarding one’s future by facilitating retirement planning. Such an account enables them to invest toward their future, especially to build a financially independent retired life.
Working employees who plan to save for the future can consider investing in PPF. However, often the question of how to invest in a PPF account or whether the expected returns would be worth it tend to confuse individuals and delay the process.
Thanks to a PPF calculator, young employees can overcome such confusion and easily compute the returns and interest rates on their potential investments.
That said, let us learn more about what exactly a PPF calculator is and how it helps investors in retirement planning. This will help you plan your retirement better and streamline your savings as per your goals.
Essentially, a PPF calculator is a financial planning tool. It’s an online calculator that is designed to help individuals ascertain how much return they should expect on a certain amount and whether the same aligns with their financial goals for the future.
Such a calculator is fed with a formula that ensures quick and easy computation of complex combinations of tenure, interest rates, and principal amount to determine the returns on investment.
Above all, it helps users to determine how much they should invest in the first place to achieve their long-term financial goals or build a corpus that would sustain them in retirement.
A PPF calculator comes in handy when planning savings. The tool uses a combination of variables to ascertain the returns on investment and how the rate of interest principal amount over a given period of time, i.e., tenure. In other words, a PPF calculator helps keep track of capital growth. Thus, giving users a better idea about the specifications of their Public Provident Fund account. However, the tool works best when users abide by certain specifications.
Individuals with a PPF account are aware that the interest rate on public provident funds tends to change monthly. Sometimes, tracking the same can be a hassle. However, having access to a public provident fund calculator can make it easier to find the current rate of interest, if the tool comes with the in-built automated interest rate feature.
A PPF calculator’s system is fed with a formula that does all the hard work of computing the maturity amount. The formula in question used by a public provident calculator is –
F = P [({(1+i) ^n}-1)/i]
In this formula,
I is the rate of interest
F is the maturity amount
N is the total number of years
P is the annual installments
Take a look at this example below to get a clear idea about PPF calculation using an online PPF calculator.
Take for instance, Suman pays Rs. 2,00,000 in her PPF account annually for a tenure of 15 years and at a rate of interest of 7%.
As per the formula,
F = P [({(1+i) ^n}-1)/i]
= 2,00,000 [({(1+7) ^15}-1)/7]
= 5763698
As per calculation, the maturity amount that Suman will receive at the end of 15 years from her PPF account is Rs. 5763698.
Notably, calculating the PPF maturity amount manually would involve several complex steps, which would be time-consuming. Additionally, manual computation tends to be prone to calculation errors, offering incorrect results. One can easily avoid this by using an online PPF calculator which simplifies the process significantly.
It is crucial to know how to use a PPF calculator online to ascertain the returns on investment accurately and without much hassles. Typically, a PPF calculator is a user-friendly financial tool that allows individuals to compute the maturity provident fund amount in just a few seconds.
All that a user needs to do is enter the following variables in the designated columns:
Once the required variables are entered, the financial tool will reflect the results within a few seconds. Notably, if an investor parks money into their PPF account on 1st April then the rate of interest will be based on the financial year. Additionally, the rate of inflation and the government’s monetary policies may affect the interest on the provident fund amount.
Some PPF calculators come with different modes that allow individuals to select one depending on their needs and requirements. A few of the common modes include –
Using the suitable mode will help plan finances and investments better and streamline the same over time. Notably, a PPF calculator is useful as long as you use it to compute the earnings of your public provident fund account. It won’t be of much use for other investment options like SIP or a fixed deposit account. In such a case, you should look for a SIP calculator or an FD calculator and plan investments towards them accordingly.
There are several benefits of using a public provident fund calculator. Some of the major ones are listed below:
Besides these individuals can use the PPF calculator multiple times and adjust the variables to determine which combination works out the best for their financial goals and helps them ace the same by the end of the tenure.
All these features and benefits make a PPF calculator an effective tool to plan and manage investments with minimal effort. Regardless, individuals must find out more about the features and features of PPF and the limitations of the investment option to make the most of it.
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