You have been renting and decided you would like to purchase a home 3 years from now. You plan to save up a $16,000 down payment and $8,000 to cover closing costs. To help you reach your savings goal, you plan to keep your funds in a low-risk investment account earning 4% per year. How much do you need to save each year to meet your savings goal?

If you asked a friend this, they may say, if you save $8,000 per year for 3 years, you will have $24,000. Why is it that you do not need to save the full $8,000/yr to reach your goal?