Savings Goal Calculator

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 behind spreadsheet functions such as PMT and FV, and the same kind of calculation as the savings goal calculator on Investor.gov, the SEC's investor education site. Finally, it runs through each year to show your balance and how much of it you paid in yourself.

A worked example

Say you want $20,000 in five years and your savings account pays 4% APY. 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 set aside, that money grows alongside your deposits, so the monthly amount drops to $209.58. You can check both figures 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 widening each year.

If the monthly figure is more than you can manage, try moving the deadline back a year or lowering the target, then see which change makes the bigger difference.

Choosing where to keep the money

For goals a few years away, many people use a high-yield savings account or a certificate of deposit, which offer a known return without stock market risk. Check that the bank is FDIC insured and look at the APY, which shows the yearly return including compounding. For goals more than about five years away, investing may grow faster, but the value can fall as well as rise.

If you are weighing up saving against borrowing for the same purchase, the loan repayment calculator shows how much interest a loan for the same amount would cost.