How to use the Savings Goal
- Enter the target amount and any existing savings.
- Enter the interest rate on the account.
- Enter either the deadline or the monthly amount you can manage.
- Adjust the timeline if the required contribution is unrealistic.
How the calculation works
The maths is a future value of an annuity, rearranged for the payment. Existing savings grow at compound interest across the period, and the required contribution covers whatever gap remains. On a two-year horizon interest contributes only a few percent of the total, so the contribution does nearly all the work; over ten years or more its share grows substantially.
For goals inside about five years, capital stability outweighs return — a savings account or short-dated fixed deposit is the right home, because a market fall a month before the deadline cannot be waited out. Inflation deserves attention on longer goals: a target set today for a purchase in eight years should be uplifted, or the saved sum will buy noticeably less than intended.
PMT = (FV − PV(1 + r)ⁿ) × r / ((1 + r)ⁿ − 1), where r = annual rate / 12 and n = monthsSource: Future value of an ordinary annuity, standard time-value-of-money formulation.
Worked example
Saving 18,000 for a deposit in 30 months, starting from 3,500, in an account paying 4.1%.
- r = 0.041 / 12 = 0.0034167; n = 30.
- Existing 3,500 grows to 3,500 × 1.0034167³⁰ = 3,878.
- Remaining need = 18,000 − 3,878 = 14,122.
- PMT = 14,122 × 0.0034167 / (1.0034167³⁰ − 1) ≈ 448.
About 448 a month. Interest contributes roughly 800 over the period — helpful, but the contribution is doing the work.
Frequently asked questions
Where should short-term savings sit?+
In a capital-stable, accessible account. For anything under five years, a market fall near the deadline is a risk you cannot recover from in time.
How much does interest actually contribute?+
Little on short horizons — often a few percent of the total over two or three years. Over a decade or more it becomes a substantial share.
What if the required amount is unaffordable?+
Extend the deadline, lower the target, or raise income. Extending is usually the least painful lever, since the required contribution falls faster than the timeline lengthens.
Should I adjust the target for inflation?+
Yes on goals beyond a few years. A figure that buys what you want today will fall short later, so uplift it by an assumed inflation rate over the period.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.