How Much to Save Each Month to Reach a Savings Goal
A savings goal needs three things: a target amount, a date, and an assumption about the interest your money will earn. With those, the monthly deposit is a straightforward calculation, and you can see how much of the target comes from your deposits and how much from interest.
This guide starts with the no-interest version, which is plain division, then adds interest, an existing balance and inflation. All the figures can be checked with a calculator and the formulas shown.
The no-interest starting point
Without interest, the monthly amount is the target divided by the number of months. For a goal of 20,000 in 5 years, there are 60 months, so you need 20,000 ÷ 60 = 333.33 a month.
This is the upper bound for any realistic plan. Any interest you earn lets you deposit less, and any months you miss push the figure up.
Adding interest
Let i be the monthly interest rate (the yearly rate divided by 12) and N the number of monthly deposits, made at the end of each month. The deposit that reaches a target FV is:
deposit = FV × i ÷ ((1 + i)^N − 1)This is the future value of a series of equal deposits, solved for the deposit.
Worked example: target 20,000, 5 years, 4% a year compounded monthly. Then i = 0.04 ÷ 12 = 0.003333 and N = 60. (1.003333)60 = 1.220997, so the denominator is 0.220997 and the deposit is 20,000 × 0.003333 ÷ 0.220997 = 301.66 a month.
You deposit about 18,100 in total and interest supplies the remaining 1,900. Adding the 60 deposits month by month, with interest each month, confirms a final balance of 20,000 within rounding.
| Yearly rate | Monthly deposit | Total you deposit | Interest earned |
|---|---|---|---|
| 0% | 333.33 | 20,000 | 0 |
| 2% | 317.22 | 19,033 | 967 |
| 4% | 301.66 | 18,100 | 1,900 |
| 6% | 286.66 | 17,199 | 2,801 |
Even at 6%, interest covers only about 14% of the goal over five years. For short deadlines, your deposits do most of the work.
Adjusting the plan
- You already have savings. Let the starting balance grow too: deposit = (FV − start × (1 + i)^N) × i ÷ ((1 + i)^N − 1). With 3,000 already saved, the 4% example drops to 246.41 a month.
- Deposits at the start of each month. The money earns one extra month of interest, so the deposit falls slightly, to about 300.66 in the 4% example.
- A fixed budget. If you can only manage 300 a month at 4%, 60 deposits give 19,889.69, just short. The 61st month takes the balance to 20,255.99, so the goal arrives one month late.
- Inflation. If the goal is a purchase whose price rises 3% a year, 20,000 today becomes 20,000 × 1.035 = 23,185.48 in five years, and the deposit at 4% rises to about 349.71.
You can also turn the question around and ask what a fixed deposit will produce. The balance after N equal deposits is deposit × ((1 + i)^N − 1) ÷ i. With 250 a month for five years at 4%, the balance is 250 × 66.2988 = 16,574.74, of which 15,000 is your own money. That is a quick way to test whether a goal is within reach before you commit to it.
That last point is easy to overlook. Setting the target in today's money underestimates what you will need. For the price effect, see inflation and purchasing power.
A simple routine
- Write down the target and the date, and convert the time to months.
- Choose a cautious interest assumption, or use 0% for a worst case.
- Compute the deposit with the formula or a calculator and round up.
- Automate the transfer if you can, so the plan does not depend on remembering.
- Recheck once or twice a year, because rates and prices change.
The future value calculator does the series calculation for any rate and period, and the compound interest calculator is useful for checking how a lump sum grows alongside your deposits.
This article is general education, not financial advice. Interest rates change and may be variable, and accounts differ in fees and terms, so treat the examples as illustrations only.
- Future Value Calculator: Enter a starting amount, how long it stays invested, an interest rate and how often it compounds. Add a regular deposit or withdrawal if you like, and see what the money grows to.
- Compound Interest Calculator: Enter a starting balance, an interest rate and a term to see how money grows when interest is added to the balance. Add regular deposits or withdrawals to model a savings plan.
This article is general information, not professional advice. See our Disclaimer and Editorial Policy.
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