How to Use the FV Function in Excel

The FV Function

1. Set up the savings scenario

• Start with the customer’s monthly savings amount
• Add the expected annual return rate
• Add the savings horizon in years
• Include the expected replacement cost if you want to compare the future savings amount against a target

2. Use the FV function to calculate the future value

• Use the FV function to estimate how much the customer’s monthly savings will grow to over time
• In the example from the video, there is no lump sum already saved today, so the present value is left out
• The result shows the value of the monthly contributions after the selected time period

3. Match the timing of every input

• This is the main setup step to get right
• Because the contribution is monthly, the return rate also needs to be converted to a monthly rate
• The time horizon also needs to be converted from years to months
• The key point from the video is that all inputs need to use the same time unit

4. Enter the monthly contribution correctly

• The monthly savings amount is entered as the payment input inside the FV function
• In the example, the contribution is treated as a cash outflow, so it is entered as a negative value
• This allows Excel to return the future account value as a positive result

5. Leave present value blank when starting from zero

• The video assumes the customer has no lump sum saved today
• Because of that, the present value input is not used
• If a customer already had money saved, that amount could be added as a present value input

6. Compare the future value against the replacement cost

• After calculating the future value, compare it to the projected replacement cost
• This helps show whether the customer will be short or fully funded by the time the system needs to be replaced
• In the video, this comparison is used to identify the savings shortfall

7. Toggle the inputs to test different savings plans

• Adjust the monthly savings amount to see how the outcome changes
• Adjust the expected return rate to test better or worse investment options
• Adjust the time horizon if the customer may have slightly more time before replacement
• This turns the worksheet into a planning tool instead of just a one-time calculation

8. Focus on the variables that move the result the most

• In the example, increasing the monthly savings has the biggest impact over a short time horizon
• Raising the return rate helps, but not enough on its own when the timeline is only five years
• The video highlights that contribution amount is often the most practical lever to change

9. Test an annual contribution version if needed

• The video also shows that you can model the same situation at an annual level
• To do that, convert the monthly savings into an annual contribution
• Then keep the rate and time horizon at the annual level
• The main idea is still the same: all timing assumptions must match

10. Use FV as a planning and education tool

• In the HVAC example, the function helps show customers how much they need to save each month to prepare for a future replacement
• The same approach can also be used for personal savings goals
• The video shows how you can change the target, return rate, and time horizon to explore different outcomes

11. Double-check the one rule that matters most

• If the savings amount is monthly, keep everything else monthly
• If the savings amount is annual, keep everything else annual

That consistency is the most important takeaway from the video when using the FV function