Question 1

How does the savings goal calculator work?

Accepted Answer

The calculator shows two things simultaneously: (1) how much you need to save per month to hit your goal by your target date, assuming interest compounds monthly; and (2) how many months it will take to reach your goal at your planned monthly contribution. Both use the same compound interest formula, so the results account for interest earned on your growing balance.

Question 2

What interest rate should I enter?

Accepted Answer

For a cash savings account, use the AER (Annual Equivalent Rate) shown by your bank. High-street instant-access savings accounts typically pay 3-5% in the current environment. Fixed-term accounts may pay more. For a Stocks and Shares ISA or investment account, historical real returns on global equities average around 5-7% per year, though returns vary considerably year to year.

Question 3

Should I use an ISA for my savings goal?

Accepted Answer

For goals more than a few months away, a Cash ISA or Stocks and Shares ISA is worth considering. All interest, dividends, and growth inside an ISA are completely tax-free. For shorter-term goals or emergency funds, an easy-access savings account gives you instant access. The £20,000 annual ISA allowance is generous enough to cover most savings goals.

Question 4

What is an emergency fund and how big should it be?

Accepted Answer

An emergency fund is money kept in an easily accessible account to cover unexpected expenses, such as car repairs, job loss, or medical bills. Most financial planners recommend 3 to 6 months of essential expenses. Use the calculator with your emergency fund target as the goal amount to find a realistic monthly saving timeline.

Question 5

How can I reach my savings goal faster?

Accepted Answer

The three main levers are: (1) increase your monthly contribution, even small increases compound significantly over time; (2) earn a higher interest rate by shopping around for better savings accounts; and (3) reduce the goal timeline by starting earlier. Automating your savings by setting up a direct debit the day after payday removes the temptation to spend first.

Savings Goal Calculator

Goal details

Time to reach £20,000 saving £200/month

Saving £296.75/month for 5 years

Related calculators

Frequently asked questions