About the Invest the Difference Calculator
This tool estimates the future value of investing the monthly savings you might have by renting instead of buying. It is useful for renters, homebuyers, and financial planners comparing the long-term impact of investing a monthly difference.
How to use this calculator
- Enter the monthly amount saved by renting in dollars.
- Enter the expected annual investment return as a percentage.
- Enter the number of years you plan to invest.
- Click Calculate to view the future value, total contributed, and estimated growth.
- Click Reset to restore the default inputs.
How it works
The calculator uses three inputs: the monthly amount invested, the expected annual return, and the investment period in years. The number of years is converted to months, and the annual return is divided by 12 to estimate a monthly compounding rate.
Example calculation
If you save and invest $800 per month, expect a 7% annual return, and invest for 10 years, the calculator uses 120 monthly contributions and a monthly rate of 7% ÷ 12. Total contributions are $96,000, and the estimated future value is about $138,484, meaning estimated investment growth is about $42,484.
Frequently asked questions
Does this calculator assume contributions are made at the beginning or end of the month?
It assumes each monthly contribution is made at the end of the month.
How is the annual return converted for monthly compounding?
The annual return percentage is divided by 100 and then by 12 to create a monthly rate.
Can the expected return be negative?
Yes, the calculator allows negative returns as long as the annual return is greater than -100%.
What happens if the return is 0%?
If the return is 0%, the future value equals the total amount contributed.
Is this a guarantee of investment performance?
No. Results are educational estimates, not investment, financial, tax, or legal advice. Actual returns can vary and may be negative.