How to Reach a Savings Goal

Quick Answer

A savings goal calculator answers a simple question: how much to save each month to reach a savings target by a certain date. It accounts for what you have already saved and the return you expect to earn, then solves for the level monthly savings that get you there on time. For example, a $50,000 target in five years is reached with a steady amount each month.

How It Works

The calculation is a sinking fund: your current savings grow at the expected return, and each monthly contribution also grows for the time remaining. The tool finds the contribution that makes the total reach your goal exactly at the deadline.

Time Horizon and Return: Shorter Versus Longer

Two inputs move the monthly amount the most. A shorter versus longer time horizon matters because a longer timeframe gives compounding more room, so the monthly savings drop. Therefore, starting later sharply raises the monthly amount, since the same goal must be met with fewer contributions. A higher assumed return lowers the monthly saving but adds risk, because reaching for higher returns means more ups and downs along the way.

Examples

A house down payment. To reach $50,000 in 5 years with $5,000 already saved and a 6% return, you would set aside around $620 a month, and investment growth covers several thousand dollars of the goal.

Already there. If your current savings already exceed the goal, the required monthly amount is zero. You can redirect that money to your next goal.

The Formula

PMT = (FV − P(1 + i)^N) · i / ((1 + i)^N − 1)

where FV is the goal, P is current savings, i is the monthly rate (annual return divided by 12), and N is the number of months. When the return is zero, this simplifies to the remaining amount divided by the number of months.

Common Mistakes