Savings Goal Calculator

Frequently Asked Questions

• How is the required monthly savings calculated?

  We solve the future-value annuity formula for the payment: PMT = (FV ? PV(1+r)^n) × r / ((1+r)^n ? 1), where r is the monthly rate and n is the number of months.

• What interest rate should I use?

  For high-yield savings: 4-5%. For CDs: 4-5%. For balanced investing (5-10 year horizon): 5-7%. For long-term equity investing: 6-8%. Use conservative numbers for short timelines.

• Should I include current savings?

  Yes — the calculator factors your starting balance into the projection, reducing required monthly contributions accordingly.

• Does this account for inflation?

  No — the calculator computes nominal returns. For long-term goals like college or retirement, increase your target by expected inflation (~2-3% annually).

• What if I can't save the required amount?

  Three levers: extend the timeline, increase the assumed return rate (and risk), or reduce the goal. The reverse mode helps you see how each adjustment changes things.

• Should this go in a separate account?

  Yes — earmark goal savings in a separate high-yield savings account or sub-account. Out of sight reduces temptation to spend it.

• How does compounding frequency matter?

  For most savings accounts, monthly compounding is standard. Daily compounding gives a marginally higher EAR but the practical difference is small at typical rates.

• Is investing or saving better for goals 5+ years out?

  For 5+ year goals, a diversified investment portfolio historically beats savings accounts. For 1-3 year goals, stick with savings or short-term CDs to avoid volatility risk.

• Should I automate my contributions?

  Absolutely. Set up automatic transfers on payday — "pay yourself first". Automation removes the willpower from saving and dramatically improves consistency.

• What if I get a windfall?

  Apply lump sums to accelerate your timeline. The calculator can be re-run with the new starting balance to show your shortened timeline.