How to Plan Savings for a Goal: How Much to Save Each Month
Work out the monthly amount you need to save to reach a target, with and without interest, using a simple worked example.
Saving for a goal is easier when you know the exact monthly number. The free Savings Goal Calculator tells you how much to set aside each month to reach a target by a date.
Quick answer
Enter the goal, what you already have, the number of years and the yearly rate you expect. The calculator shows the monthly amount, the total you will deposit and the interest you earn.
The Savings Goal Calculator tool on shobfree.com, ready to use in your browser.
A worked example
You want 5,00,000 taka in 5 years and already have 50,000. With a 6 percent yearly return, you need to save about 6,200 a month. Without any interest the same plan would need 7,500 a month, so the interest does about 1,300 of the work every month.
What changes the answer
- Time: doubling the time roughly halves the monthly amount.
- Rate: a higher rate helps, but you cannot count on it. Use a cautious number.
- Starting amount: what you already have also grows, so it reduces the monthly need.
A simple way to stay on track
- Decide the date first. A goal with no date is a wish.
- Move the money on the day you are paid, before you spend.
- Keep it in a separate account so it is not mixed with daily money.
- Review once a year and adjust the amount if your income changes.
Common mistakes
- Using a high return that a savings account does not give.
- Forgetting that prices rise. For long goals, see the Inflation Calculator.
- Stopping when the market falls, which locks in the loss.
Choosing a realistic return
A savings account or fixed deposit gives a modest, steady return. Shares and funds may give more over many years but can fall in the short term. If the goal is less than three years away, such as school fees or a wedding, protect the money and use the low rate in the calculator. For goals ten years or more away you can be a little bolder, but still prefer a cautious figure.
Splitting several goals
If you have more than one goal, calculate each separately and add the monthly amounts. Then check that the total fits your budget. If it does not, move the least important goal to a later date instead of dropping the others. A longer time lowers the amount quickly.
A worked plan for three common goals
| Goal | Amount | Time | Monthly at 6% |
|---|---|---|---|
| Emergency fund (6 months of costs) | 1,20,000 | 2 years | about 4,700 |
| Motorbike down payment | 1,00,000 | 18 months | about 5,300 |
| Child's school fund | 5,00,000 | 5 years | about 7,200 |
These figures assume a small starting balance and a steady 6 percent. If your starting balance is zero, the monthly amount is slightly higher. Use the calculator for your exact numbers.
Keeping the plan alive
Automate the transfer so that you do not have to decide each month. Name your accounts after the goal, such as "School fund", because a named account is harder to raid. Once a year, increase the amount by the same percentage as your income rise, even if it is only 5 percent.
Sources and further reading
- For guidance on deposit products and rates, check your bank's current schedule of charges and rates.
Frequently asked questions
Does it include tax? No. Interest income may be taxed, so your real return can be lower.
Is the interest compounded? Yes, monthly, which is how most savings products work.
What if I cannot afford the monthly amount? Extend the number of years, lower the target, or start with a smaller amount and raise it every time your income rises.
Next step
Try your own goal in the Savings Goal Calculator. To see how a regular investment grows, open the SIP Calculator.
