Savings Goals

If you have got so far in your financial journey that you’ve:

โœ… Made a budget ๐Ÿงฎ
โœ… Paid off any short-term debts ๐Ÿ’ณ
โœ… Sorted an emergency fund โ˜”

The next step is to think about your future goals, and get on track to achieve them.

Set your goals ๐ŸŽฏ

First, write down your financial goals, along with how much you expect them to cost and when you want them by. For example:

๐Ÿ Holiday ยฃ9006 Months
๐Ÿ“ฑ New Phoneยฃ4001 Year
๐Ÿš— Car ยฃ5,0002 Years
๐Ÿก House Deposit ยฃ40,0004 Years
๐ŸŽ“ Child’s University Costsยฃ30,00018 Years

Your goals can range from little amount to a greater amount.

Short-term saving goals (within 5 years) โฒ

You’ll be saving for these in cash (in your bank account, not under the mattress!) so it’s very simple to calculate how much you need to save each month to reach your goals in time. Just divide your target amount by the number of months between now and your chosen time span.

In the above example that would be:

  • Holiday: ยฃ900 รท 6 Months = ยฃ150 needed to save per month
  • Phone: ยฃ400 รท 12 months = ยฃ33 needed per month
  • Car: ยฃ5,000 รท 24 Months = ยฃ210 per month
  • House: ยฃ40,000 รท 48 Months = ยฃ833 per month

If your total monthly saving requirement is larger than you can afford, you will need to adjust your goals’ costs or timeframes, or cut back on other expenses in order to meet your goals (check that budget again).

Having chosen affordable amounts to put away, next, choose where you’d like to hold your savings.

  • Your bank account may offer savings ‘pots’, which are useful for organising short term goals.
  • Check out the Top Savings Accounts on Money Saving Expert. You will be able to get some interest paid out to grow your savings ever so slightly, especially if your goal is more than a year in the future.
  • If you’re a first time buyer saving for a house deposit, check if a LISA could work for you.

Set up a standing order for payday to transfer those funds to your chosen account(s), and you’re done! Congratulations.

For the longer term (5 years or more) ๐Ÿ“†

If your goal is more than five years away, you can consider investing the money for a greater possible growth than you might normally achieve when putting that money aside in a bank’s savings account.

This method is only suitable for goals over 5 years away, as in the short term investments can be very volatile – market fluctuations happen regularly and can rise/fall daily. The shorter the time period you invest for, the higher the chances that the final value of your investments could drop below the amount you put in – see this Monevator post for some statistics.

However they’re an extremely powerful tool to reach your long term goals.

Saving for a deposit ๐Ÿ 

If you’re saving for your first home, you’ll also want to read about:

  • LISAs – a savings account which gives a boost to your deposit savings
  • How mortgages work – this will help you calculate your target deposit based on a realistic amount of borrowing

More resources ๐ŸŽฌ

Check out the video below by Meaningful Money for more information on setting your financial goals.