Determining how much you need to save can be overwhelming, especially if you have a lot of goals you want to reach within a certain timeframe. Whether you are saving for a down payment for a new house or want to purchase a new car, there are ways you can calculate how much you need to set aside and how long it will take until you reach your goal. We want to share with you about savings goal calculators and how you can use them to better manage your personal finances. No matter what financial stage of life you find yourself in, savings goal calculators are helpful tools that can keep you motivated and disciplined as you save.
In a rising interest rate environment, there is no better time than now to begin your savings plan. You’ll want to be prepared for any unexpected financial responsibilities that may head your way, and you’ll also want extra money for flexibility to spend on things you enjoy. Remember, it’s always the perfect time to set goals for your financial future!
Why Is Setting a Savings Goal Important for Financial Planning?
While you’ve likely heard time and time again how important it is to save, it can be overwhelming to know how to save in the most beneficial and practical ways. Most Americans struggle with managing even the simplest savings goals, and they can barely manage to keep up with their monthly expenses. Less than 30% of Americans have $1,000 in savings, one in five Americans have no money saved for emergencies, and more than 70% of Americans live paycheck to paycheck. These staggering statistics are concerning for the average American’s financial stability.
This is why setting savings goals is so important for your financial health. Since so many people don’t have a basic savings plan, you might be thinking of savings goals as more broad than specific. Savings goals can be broader, but it is more fruitful in the long run for you to set specific goals for what you want to achieve because it provides accountability for your actions. There are three different kinds of savings goals, which are unique to match whatever needs you may have.
- Short-term goals are usually set for one year or less, and these could be used for small debts, a new phone, or a new computer.
- Mid-term goals can last for one to five years. These could be used for a dream vacation, down payment for a house, or a new car.
- Long-term goals are for anything that will take more than five years. They are often affiliated with paying off ongoing debts, such as your student loans and mortgage. It could also be used for your retirement or children’s college educations.
Regardless of what kinds of goals you have in mind for your future, making a strategy for your finances will help keep you aware of how your current choices are affecting you long-term and can improve your wealth management.
What Is a Savings Goal Calculator and How Does It Work?
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Once you’ve chosen your savings goals, it’s time to see how much you’ll need to set aside financially. You may be wondering: why is a savings goal calculator any different than a regular one? Here are the components that make up a savings goal calculator and sets them apart from other financial wellness tools:
1. Starting Amount
The first step is to know how much money you do or don’t have to put toward your savings goal. For example, let’s say you saved $4,000 over the past year to put towards a down payment on a house. That amount is going to be the foundation from which you build your savings.
2. Monthly Savings
Before you know how much you’re going to put towards monthly savings, you need to be sure your personal budget is updated. It’s important to know how much you can afford to put towards your savings goal. Don’t be discouraged if the amount you are contributing isn’t as high as you want it to be. You’ve already taken a crucial step in improving your financial wellness by setting a goal for yourself to begin with, and it’s easier to tackle to your goal step-by-step.
3. Interest Rate
Since the savings goals you are working towards are large sums of money, it is important that you keep them in interest-earning savings accounts. This is a huge plus to consider because your money is earning more than what you contribute every month. The accounts you choose will vary depending on your goal, but some great options for you could be high-yield savings accounts, certificates, or money market accounts. If you’re unsure about which savings account is best for you, reach out to a financial counselor at your local bank or credit union.
After you choose your savings account, you will need to know what your dividends will be. A dividend is the interest earned on your money. These dividends are calculated from the annual percentage yield (APY), which is the percent of interest paid by your financial institution. The APY can vary significantly depending on what accounts and rates they offer. When you’re calculating your contributions to your savings goal, you’ll want to know what the interest rate on your account will be so your earnings will grow even more and help you to reach your goal faster.
4. Timeline
We know the most pressing thing on your mind is likely when you’ll be able to finally reach your savings goal. Savings goals calculators take this into account. When you’re calculating your goal, you’ll be able to select a desired timeline. These usually are set in months or years.
This is ultimately how a savings goal calculator works: you plug in your financial information and it will automatically calculate what your end goal will be. Depending on the length of time you set or how much you’re contributing monthly, you’ll need to be able to know if you can reach your goal. It is a great resource to use, no matter how many or little savings goals you want to set for yourself.
How Often Should You Check and Update Your Goals Using the Savings Goal Calculator?
As you begin to delegate your monthly savings towards your goal, you’ll want to be aware of any necessary changes you may need to make depending on your budget. Your budget is essential to how much you’ll be able to contribute to any savings goals you have. There might be times when you’ll need to adjust your goals if there are other financial obligations that take priority. For example, you might want to put more money towards your student loan debt instead of a vacation since one is more of a need than a want. One strategy that could help you make sure you’re delegating the right amount of money to teach of your goals is to make a priority list of all your goals to know what needs to be reached first.
Having a priority list will help determine how often you’ll need to check in with your finances. For short-term goals, you’ll likely want to check in monthly to make sure you’re staying on target. Mid-term and long-term goals can be checked quarterly or every six months, depending on how often you need to adjust your budget. In general, it’s best to always keep an eye on your savings to make sure you’re staying on track to meet your goal within the desired timeline.
Where Can You Find a Savings Goal Calculator, and Is It Free to Use?
The best thing about a savings goal calculator is that it's easily accessible and completely free to use. Since setting savings goals is such a key component of saving and investing, these calculators are offered across a variety of financial websites. They are user-friendly and follow a similar format. Keep in mind that some calculators will require you to enter an email address to send you the results, but you don’t need to be a member or regular banker to calculate your savings goals.
Set Your Savings Goals with Leaders Credit Union
From weddings to kitchen renovations, we know you have personal milestones and dreams in your life, and you shouldn’t have to be stressed about money to keep you from enjoying such precious moments. This is why setting savings goals is so crucial for your financial well-being and stability.
Are you ready to accomplish your savings goals? Use Leaders Credit Union's free savings goal calculator to help you be financially prepared.
To receive extra assistance with how to save well, check out our free Beginner’s Guide to Establishing Savings.
