Savings Goal Calculator
How Long Will It Take to Save $10000?
Why It Matters
It may be $10,000, or it may be $1,000. Whatever your savings goal, you need to know how long it is going to take you to get there. We all make plans in our heads for future purchases, but we do not always determine the right strategy for reaching those goals. It is essential we do so, but it is often difficult to know how much we need to put aside to get to the figure we want for our savings.
Whether purchases are short term, medium term or long term – whether next year’s holiday, a new car in two years, or saving up for a child’s wedding in ten years time – we need to be savings-savvy. The Savings Goals Calculator will help you understand what you need to do to get where you want to be.
Making Plans and Calculations
You will need to think of the following areas.
| Question | Explanation |
|---|---|
| When do I need the money by? | The date you have in mind to hit your savings targets. |
| How long will it take me to save the money? | The number of weeks and months and years it might take. |
| How much do I have left over after expenses? | How much you can save each month. |
| What return can I expect on my savings? | How much interest you will earn along the way – which can obviously help speed your goals along. |
In the Savings Goals Calculator enter the following information.
| Prerequisite | Explanation |
|---|---|
| 1 | your current savings balance, if there is one |
| 2 | your savings goal target |
| 3 | The amount of money you plan on saving regularly, e.g. monthly from your salary |
Here is a table outlining some scenarios to help you see what is required.
Savings Goals
| Savings Goal | $200 per month | $250 per month | $300 per month |
|---|---|---|---|
| $5000 | 25 months | 20 months | 17 months |
| $10000 | 50 | 40 | 34 |
| $20000 | 100 | 80 | 67 |
| $30000 | 150 | 120 | 100 |
| $40000 | 200 | 160 | 134 |
| $50000 | 250 | 200 | 167 |
| $100000 | 500 | 400 | 334 |
To be clear, therefore, if you want to save $30,000, and you can only afford $200 per month, it is going to take you 150 months, which is therefore 12 years and 6 months. This assumes that you are not earning any interest, of course, so depending on the interest rate it will take less.
Similarly, if you can contribute $300 per month, it will take you under 3 years – just 34 months – to get to $10000.
Check out our Compound Interest Calculator to see the huge difference that compound interest can make. It could knock years off this length of time if your contributions are in a savings account generating monthly compounding.
Have a look at this table to see the importance of compound interest. The table imagines you are saving $100 per month
| Year | Balance with 0% | Balance with 3% int | Balance with 5% int |
|---|---|---|---|
| 1 | 1200 | 1220 | 1233 |
| 2 | 2400 | 2476 | 2529 |
| 3 | 3600 | 3771 | 3891 |
| 4 | 4800 | 5106 | 5324 |
| 5 | 6000 | 6481 | 6829 |
As you can see, with just 5% compound interest you are adding $829 to your savings after 5 years. This equals 14% of your own contributions. It is the equivalent of getting $14 per month added ‘free’, to look at it one way.
The figures are even starker if you look at what happens after 8-10 years.
| Year | Balance at 0% int | Balance at 3% int | Balance at 5% int |
|---|---|---|---|
| 8 | 9600 | 10862 | 11823 |
| 9 | 10800 | 12412 | 13661 |
| 10 | 12000 | 14009 | 15593 |
By Year 10 you have made $3593 interest on your $12000 dollars contribution on a 5% return.
Use the Savings Goals Calculator to explore different scenarios with different combinations of contributions and interest rates. You will be genuinely amazed at how much sooner you can reach your goals if you can secure a good compound interest product or rate.
Strategies for Saving Well
There are tips to remember.
| # | Tip |
|---|---|
| 1 | Put as much in as you can per month. Your future self will thank you for it! |
| 2 | Be committed. Don’t miss months. |
| 3 | Find a good rate or product that is clear that the rate will sustain, or that it will be above or in line with the rate of inflation. |
| 4 | Choose a high rate product and check that it is not going to drop its rate after ‘an introductory offer’ |
| 5 | Keep calculating! If the rate drops even by 1% this could have a major impact on how long it will take to reach your goals. Don’t let the banks or lenders win! |
| 6 | Make sure there are no penalties for withdrawals – though do all you can not to withdraw the money unless it’s really necessary, as it is the later years that compounding really generates outsize returns. |
| 7 | Set up a regular standing order or debit to your savings account so that it is automatic. This helps you build it into your budgeting. |
| 8 | If it is to your advantage, swap products to a better rate. Don’t be put off by admin. If it is worth it, it’s worth it! |