How much should I invest now so that 26 months from now I will have $3800 in the account?

You could do this a few different ways to ultimately have $3800 in your account and I will discuss two different ways with you. You could either put in a lump sum right now to start accruing interest or you could deposit an amount each month.

1. Deposit a lump sum
This would require just putting down an amount right now and letting it grow over the next 26 months. To solve for this amount, simply take the $3800(future value amount) and divide it by the discount factor:

$ to invest today = 3800/(1.00333333)^26
ANSWER: $3485.04

The rate used is 0.33% or .00333333 since the interest rate of 4% is stated in annual terms. Therefore, to get to $3800 within 26 months, you would need to deposit $3485.04 today.

2. Deposit an amount each month
To calculate the amount of money you would need to deposit each month to meet your goal of $3800, you should use the future value of an annuity formula:

Future Value= PMT * {(1/r) - [1/r(1+r)^t]} * (1+r)^t

where:
r =monthly rate=0.333333% or 0.0033333
t =# of periods or payments= 26
Future Value= $3800

Going through this formula and calculation, you come up with a final answer of $140.16 that must be put into the mutual fund each month in order to accrue $3800 within 26 months.

You can also verify this calculation by utilizing the PMT formula in Microsoft Excel. Open Excel and click on any cell. Type "=PMT(" into the cell to bring up the formula. Enter in the appropriate rate, number of periods, and future value to calculate the payment amount. This is a fast and simple way to double check your math in case you don't trust yourself when going through this calculation.

You can use the formula above or the one in Excel to calculate deposit amounts for bi-monthly, weekly, or even daily payments in case you want to come up with a different deposit schedule. Just make sure the rate and number of periods reflect the same time period.

To recap, it would be the easiest to deposit a lump sum into your mutual fund, sit back, and watch it grow to your goal of $3800. However, if you don't have the cash to throw down $3485.04 today, you could opt for a monthly payment of $140.16 to reach the same goal. In addition, you could calculate other payment schedules if you wish to align your paycheck with deposits into the mutual fund.

Good luck to you and I hope you reach your goal!