Savings calculator: how to set up a savings plan (2024)

You may be wondering how to set up a savings plan. The secret is to get organised.

Otherwise, your savings will probably never get off the ground if all you have is a vague promise to stash away whatever’s left in your bank account before each pay-day. And there are lots of top savings accounts that could be earning you interest.

Spare cash may seem like a scarce commodity in the current climate, so it’s hardly surprising that 15% of people across the UK don’t have any savings, according to Moneyfarm and among those who do, one in three has less than £1,500.

Alice Haine, personal finance analyst at the investment platform and coaching service Bestinvest, said: “Anyone starting out on a new saving and investment journey should decide what their financial goals are so they not only know what they are funnelling away money for but also what their time horizon is.

“A short-term goal such as a summer holiday needs a very different approach to a long-term goal such as retirement, which can have a time horizon of up to 40 years or more”.

How to set up a savings plan

Before you open a shiny new savings account, it’s worth paying off any expensive debts first. This could include clearing credit or store cards that are racking up interest.

Once you’ve done this, it’s time to build up your cash savings.

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“Your first priority should be to build an emergency fund of at least six to 12 months' worth of expenses to cover job loss, or unexpected costs such as a faulty car or broken-down boiler”, said Haine.

How much should you target to save?

There’s no fixed amount when it comes to how much you should save each month. It’ll depend on your income and outgoings.

Kevin Mountford, co-founder of Raisin UK, said: “Many experts recommend a 50%, 30%, 20% strategy. 50% of your salary is for your main living expenses, like housing (rent or mortgage), food and utility bills. 30% is for your wants, from restaurants and clothes shopping to subscriptions and gym memberships. Then, 20% can go into your savings accounts.

“A good way to save is to automatically move 20% into a savings pot, and you can do that with a standing order on pay-day”.

You can also use money apps like Chip and Plum to help make the savings process easier. Chip analyses your spending habits and works out how much it thinks you can save each month before switching the cash across.

With Plum you can set up multiple savings “pockets” for different goals, or using its money tools opt to save at certain times of the month.

You can use our calculator to work out how much you can save or how long it will take you to hit your savings goal.

What’s best - instant access or regular savings?

Easy access accounts have in the past tended to pay lower rates – with rates around 0.17% one year ago, according to the data analyst Moneyfacts.

However, savings rates are on the up, thanks to rising interest rates Some of the best savings accounts – including instant access accounts paying more than 2%. Barclays and Nationwide are even offering rates as high as 5% or more, although you will need to jump through a few hoops to get these accounts.

In terms of top regular savings deals, you can get more than 5% from Lloyds Bank, NatWest, Yorkshire Building Society. But you will need to be a customer of those banks already before applying.

Think carefully about what sort of savings account is right for you. A regular saver account may offer a higher interest rate, but there could be limits on withdrawals, and restrictions on how you can save each month.

An instant access account may have a slightly lower rate, but you’ll have more freedom over how much you save, and when to make withdrawals.

Tying up your money for longer with one, two or five-year fixed-rate accounts is another option to consider. They could pay you more interest – but the flipside is the risk of penalties if you need your cash in a hurry.

It could make sense to open several accounts, so you get the best of both worlds - high interest from a regular saver or fixed-rate account, and more flexibility from an instant-access account.

What about investing spare cash?

Saving is about putting cash aside for the short term – say next year’s holiday or a new car or kitchen – whereas investing means you’re in it for the long haul.

Kalpana Fitzpatrick, author of Invest Now and senior digital editor of MoneyWeek, said: "If you have money that you don't need to use for the long term, then it makes sense to invest the cash as your money will potentially grow faster and can beat inflation”.

“By long-term, I mean five years or more, because investments need time to grow as there will be times when the stock market does well and other times it doesn't - but over the long-term you usually see an upside.”

She added: "I would stress that it is easy to start and you do not need to be an expert - it's easy to start with a robo-advisor."

How much should you look to invest?

When it comes to investing, you don’t want to over-stretch your finances as this isn’t money you can get back in a hurry.

The advice from Kalpana Fitzpatrick is to start small to get comfortable: “Work out an affordable amount you feel comfortable with each month (say £10) and set up a standing order for that amount to go into your investment account each month”.

Further down the line, if you get a bonus at work or come into some money, you may want to increase the amount you invest.

Fitzpatrick said: “Investments do come with risk, but most people do well as long as they understand they must stay invested for five years or more, pay in consistently, and not panic when stock markets decline."

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Savings calculator: how to set up a savings plan (2024)

FAQs

How to set up a savings plan? ›

How to Create a Savings Plan
  1. Step 1: Start with a financial inventory. ...
  2. Step 2: Establish your savings goals. ...
  3. Step 3: Decide how much to allocate to each goal. ...
  4. Step 4: Decide where to keep your savings. ...
  5. Step 5: Maximize your savings plan.

How much will I have if I save $100 a week for a year? ›

The first thing we need to know is how much $100 per week works out to on an annualized basis. There are 52 weeks in a year. That means that, after a full year of saving, $100 per week adds up to $5,200.

What is a savings plan formula? ›

Savings Plan Formula (regular payments)

A=PMT×[(1+APRn)(nY)−1](APRn) where. A = accumulated savings plan balance (FV -- future value) PMT = regular payment (deposit) amount. APR = annual percentage rate (in decimal)

How much will I have if I save $10 dollars a day for a year? ›

Investing $10 a day could grow your money much more than you think. Your $10 a day adds up to $3,650 invested each year. As your invested funds earn returns, you benefit from compound growth and can grow your net worth dramatically over time.

What is the 50 20 30 rule for savings account? ›

Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.

What is the 30 30 rule for savings? ›

One of the most popular rules, the 30:30:30:10 rule, can be applied both in terms of income planning, as well as pension planning. The income planning version says that you put 30% of your income towards day-to-day expenses, 30% towards investments, 30% for retirement savings and 10% for emergency expenses.

Is $600 a month savings good? ›

But when it comes to what they need to be saving, it depends. So, if we're starting with a 30-year-old, they should be probably saving close to $580, $600, at least, a month. And that's if they're going to earn a high rate of return. So it depends on how aggressive and risky that they're looking to be.

Is $1,000 a month a good amount to save? ›

Absolutely. Saving £1,000 a month in the UK is a wise financial decision that can have a positive impact on your financial well-being.

What is a realistic savings plan? ›

With 50% of your monthly income going towards your needs and 30% allocated to your wants, the remaining 20% can be put towards achieving your savings goals, or paying back any outstanding debts.

What is the 7 rule for savings? ›

The seven percent savings rule provides a simple yet powerful guideline—save seven percent of your gross income before any taxes or other deductions come out of your paycheck. Saving at this level can help you make continuous progress towards your financial goals through the inevitable ups and downs of life.

How can I save $5000 fast? ›

Ways To Save $5,000 in a Year
  1. “Chunk” Your Savings. The first step to saving $5,000 in a year is to break down your savings goal into manageable portions. ...
  2. Automate Your Savings. ...
  3. Save in a High-Yield Saving Account. ...
  4. Track Your Cash Flow. ...
  5. Boost Your Earnings. ...
  6. Declutter for Cash. ...
  7. Evaluate Your Subscriptions. ...
  8. Challenge Yourself.

How much will I have if I save $500 a month for 10 years? ›

What happens when you invest $500 a month
Rate of return10 years30 years
4%$72,000$336,500
6%$79,000$474,300
8%$86,900$679,700
10%$95,600$987,000
Nov 15, 2023

What happens if you save $100 dollars a month for a year? ›

If you save $100 monthly for an entire year, you'll have $1,200 in the bank. But if you keep your savings in a savings account, you'll also earn interest. After one year of keeping $1,200 in a high-yield savings account with a 4.5% APY, you'll earn $54 in interest.

How much is $1 a day for 10 years? ›

$6,398.88

What is the 50 30 20 budget rule? ›

The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

What is the 60 20 20 saving rule? ›

Put 60% of your income towards your needs (including debts), 20% towards your wants, and 20% towards your savings.

What is the 4 3 2 1 savings plan? ›

The 4-3-2-1 Approach

One simple rule of thumb I tend to adopt is going by the 4-3-2-1 ratios to budgeting. This ratio allocates 40% of your income towards expenses, 30% towards housing, 20% towards savings and investments and 10% towards insurance.

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