How to use the Savings Goal Calculator
- Enter the amount you want to reach and how much you have already saved.
- Enter how many years you have to reach the goal. Use decimals for part of a year, such as 2.5.
- Enter the interest rate you expect to earn on your savings.
- Read the monthly saving needed, the total you will deposit and the interest you will earn.
Formula used
Needed = goal − current × (1 + i)ⁿ. Monthly saving = needed × i ÷ ((1 + i)ⁿ − 1), where i is the monthly rate and n the number of months. Deposits are made at the end of each month.
Worked example
Here is the Savings Goal Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Savings goal | $50,000 |
| Already saved | $5,000 |
| Time to reach the goal | 5 years |
| Interest rate (per year) | 4 % |
| Result | |
| Monthly saving needed | $662.08 |
| Total of your deposits | $39,725 |
| Interest earned | $5,275 |
Monthly saving by time available
The default goal and savings with different time frames.
| Time to reach the goal | Monthly saving needed | Interest earned |
|---|---|---|
| 3 years | $1,161.91 | $3,171 |
| 5 years | $662.08 | $5,275 |
| 10 years | $288.94 | $10,328 |
| 15 years | $166.19 | $15,085 |
| 20 years | $106.02 | $19,554 |
How the monthly amount is found
Your existing savings will grow on their own. After 5 years at 4% interest, $5,000 becomes $6,105. The rest of the goal, $43,895, must come from monthly deposits that also earn interest.
For a $50,000 goal in 5 years the calculator finds a monthly saving of $662.08. You deposit $39,725 yourself, and $5,275 of the goal comes from interest. The formula assumes deposits at the end of each month and interest compounded monthly.
How time changes the amount
The longer you have, the less you need to save each month. For the same goal, the monthly saving is $1,161.91 over 3 years, $662.08 over 5 years, $288.94 over 10 years and $106.02 over 20 years.
Time also gives interest more room to work. Over 20 years the interest earned is much larger than over 3, so starting early matters more than the exact rate you get.
What interest rate should you use?
Savings accounts and certificates of deposit pay a rate that changes with the market. Without interest at all, the same goal would need $750.00 a month, compared with $662.08 at 4%. If you plan to invest in stocks or funds instead of a savings account, returns are not guaranteed and can be negative in some years, so use a conservative figure and consider a shorter goal timeline for money you cannot risk.
If you are unsure, run the calculation with a low rate and a higher one. If the monthly number from the low rate is affordable, you have a safe plan.
Making the plan work
Set up an automatic transfer on payday so the money is saved before you can spend it. Keep your savings goal money separate from everyday spending, ideally in an account that pays interest. Review the plan once or twice a year and raise the monthly amount when your income grows.
Do not forget inflation when the goal is far away. A house deposit or a degree may cost more in ten years than it does now, so consider raising your target to match.
Frequently asked questions
How much should I save each month to reach my goal?
Enter your target, your current savings, the time and the rate. The calculator gives the monthly deposit needed.
What if my savings already reach the goal?
If your current savings will grow to the goal on their own, the monthly saving is zero.
Is the interest guaranteed?
Only if it is a fixed rate. Savings account rates can change, so test a few rates.
Are taxes on interest included?
No. Interest may be taxable depending on where you live. Reduce the rate you enter to allow for tax.
Does this adjust for inflation?
No. If the goal will cost more in the future, enter the expected future price as the goal.
What if I make deposits at the start of the month?
The calculator assumes deposits at the end of each month. Deposits at the start earn slightly more, so you would need a little less.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.