Bureau of Wealth

Savings Goal Calculator

By the Bureau of Wealth team Updated

This calculator is general information, not financial advice. Check your own figures with the provider or a qualified adviser before acting on them.

Set a target, a deadline and your savings rate to see the monthly amount you need to put aside, and how much of the goal interest will cover.

The AER on your savings account. Use 0 for cash kept at home.

Check the highlighted fields to see your results.

What this calculator assumes

  • The AER you enter stays the same for the whole period. Most savings rates are variable, so treat the result as a guide and rerun it when your rate changes.
  • The rate is divided by 12 and interest compounds monthly. Accounts that pay interest once a year work out very slightly differently.
  • You save the same amount at the end of every month and make no withdrawals.
  • Tax on interest is not deducted. Many people pay no tax on savings interest because of the Personal Savings Allowance, and interest in an ISA is tax-free.
  • Money you already have is in the account at the start and earns interest from day one.

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How the monthly amount is worked out

Reaching a savings goal has two parts: money you pay in, and interest that money earns. The calculator first works out what your current savings will grow to by the deadline on their own. Whatever is still missing has to come from monthly deposits, which also earn interest from the month they go in.

It then finds the single monthly amount that, with interest compounding each month, grows to exactly that missing figure. This is the standard future value calculation used by spreadsheet functions such as PMT and FV. Finally, it works through each year to show your balance and how much of it you paid in yourself.

A worked example

Say you want £20,000 for a house deposit in five years and your account pays 4% AER. Starting from nothing, you would need to save £301.66 a month. Over 60 months you pay in £18,099.60, and interest makes up roughly the remaining £1,900.

If you already have £5,000 saved, that money grows alongside your deposits, so the monthly amount drops to £209.58. You can check both in a spreadsheet: =PMT(4%/12, 60, 0, -20000) returns 301.66, and =PMT(4%/12, 60, -5000, 20000) returns 209.58.

Why the rate and the deadline matter

Time does more work than the rate on short goals. At 0% you would need £333.33 a month to reach £20,000 in five years, only about £32 more than at 4%. Over longer periods compounding matters far more, because interest starts earning interest of its own. The year-by-year table shows the gap between what you paid in and your balance growing each year.

MoneyHelper suggests breaking a big goal into smaller milestones and saving a regular amount by standing order on payday. If the monthly figure is more than you can manage, try moving the deadline back a year or lowering the target, and see which makes the bigger difference.

Choosing where to keep the money

Easy access accounts let you withdraw at any time. Regular savers often pay higher rates but cap how much you can pay in each month. Fixed-rate bonds lock your money away for a set term. Cash ISAs let you save up to the annual ISA allowance with no tax on the interest. Whichever you choose, check the provider is covered by the Financial Services Compensation Scheme and compare accounts by AER.

Saving for a home? Remember that stamp duty is usually paid on top of your deposit. The stamp duty calculator shows what you would owe on your target price in England, Scotland, Wales or Northern Ireland.

Frequently asked questions

What is AER?

The annual equivalent rate shows what interest would be worth over a year once compounding is included. Every UK savings account quotes it, so it is the fairest way to compare them.

Should I include money I already have?

Yes, if it will stay in the account until your deadline. It earns interest for the whole period, which lowers the amount you need to add each month.

Will I pay tax on the interest?

Often not. The Personal Savings Allowance lets basic rate taxpayers earn up to £1,000 of interest a year tax-free and higher rate taxpayers up to £500, and interest inside an ISA is always tax-free.

What if my savings rate changes?

Most savings rates are variable and can change at any time. Rerun the calculator with the new rate and adjust your monthly amount so you stay on track.

How much should I keep for emergencies before saving for other goals?

MoneyHelper suggests aiming for three to six months of essential outgoings in an easy access account, and says one month's worth is a good place to start.

Sources

Figures come from institutions millions of people rely on. How we keep calculators accurate.