The next step is to think about your future goals, and get on track to achieve them.
Set your savings goals 🎯
First – write down your financial goals, along with how much you expect them to cost and when you want them by, for example:
|🏝 Holiday||£900||6 Months|
|📱 New Phone||£400||1 Year|
|🚗 Car||£5,000||2 Years|
|🏡 House Deposit||£40,000||4 Years|
|🎓 Child’s University||£30,000||18 Years|
Your goals can range from little amount to a greater amount.
Short-term saving goals ⏲ (within 5 years)
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: £900 ÷ 6 Months = £150 needed to save per month
- Phone: £400 ÷ 12 months = £33 needed per month
- Car: £5,000 ÷ 24 Months = £210 per month
- House: £40,000 ÷ 48 Months = £833 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 MSE. 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.
Long-term goals 📆 (5 years or more)
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. Have a look at our page on compound interest to see what a difference it makes.
Check out the video below by Meaningfulmoney for more information on setting your financial goals.