DEFINITION of Anticipated Balance
Anticipated balance is the amount that a savings account will have at some future date, or that a time deposit will have at maturity, assuming no withdrawals or additional deposits occur. In broad terms, anticipated balance means the net balance in any account at a future point in time. Calculation of the anticipated balance assumes compound interest, rather than simple interest.
BREAKING DOWN Anticipated Balance
Anticipated balances are important in the context of financial planning. For example, consider a couple that wants to save $20,000 over the next four years as the down payment for a house.
They currently have $10,000 in savings, and to achieve their dream of becoming homeowners, would like to know approximately how much they should save per year in a time deposit, in order to reach their target of an anticipated balance of $20,000 in four years. Assuming a compound interest rate on deposits of 3% per annum, they would need to save $2,390 per year.
Anticipated balance can also be used when planning for college, retirement, or even something as simple as planning for a vacation.