What we'll cover
How to set your savings goals
How to calculate how much you can save
Ways to save more
Saving money can be as easy to avoid as scheduling your next dentist appointment. It’s something that might not have any effect in the moment, but when you start to have a painful toothache (or you need to make a down payment on a car), you’ll want it immediately.
Your life is filled with dreams, and whether you want to get your pilot’s license, take time off of work to travel, or one day buy a house, saving is the best way to set yourself up for success.
With all of your goals, it can be confusing where to begin. Should you start by only saving for your emergency fund? What about the vacation you’re planning for next year? Wait, the holidays are just around the corner, should you be saving for gifts? The answer is yes! Saving for multiple goals is a great way to plan for both your needs and wants.
Follow these steps to evaluate, prioritize, and ultimately save for your goals.
Step 1: Determine your goals and set your deadlines
As a popular movie once stated, life is like a box of chocolates, you never know what you’re going to get. But you do have some control over the box you choose. Determine the things in life you want to save for (a new handbag, event tickets, or a house, for example), but also those potential, unexpected expenses, like a health scare or a surprise car repair. Make sure your list includes things and experiences you want, as well as those life situations you actually don’t want to happen. That way, so you’re prepared in case they do.
After you have identified your savings goals, you should then set a target date for each. This will help you figure out how much money you should be saving on a regular basis to meet your goals on time.
Step 2: Calculate how much you can save
Now that you know the amount you need to save and when you would like to save it, it’s time to see how much money you’ll realistically be able to put toward your goals. Compare your monthly expenses against your monthly income. How much do you have left over? This is the amount you can put toward savings.
If this number seems small or you don’t already have a budgetin place, you can try the 50/30/20 plan. With it, 50% of your income goes to your needs, 30% goes to your wants, and 20% is put toward your savings and any debt you have. Once you know how much money you can save each month, a budget can keep you from unnecessary spending and help you stick to your saving plans.
Step 3: Prioritize, prioritize, prioritize!
Equally dividing your monthly savings among all of your goals may seem like the easiest method, but it’s probably not the best idea. Just how you prioritize your schedule every day, you should prioritize which goals need to be met first. That doesn't mean you should wait to save for all of your goals — it just means that you should allocate more of your savings towards those that are more important.
How do you do that? Look at your savings goals and choose your top three — one in the near future, one later on down the road, and one long-term — and start setting money aside for them. The buckets tool in our Savings Account can divvy up your savings into various categories, keeping you organized without the hassle of multiple savings accounts. While you might have more goals than this, sticking to just a couple with varying timelines makes it easier to keep track and accomplish.
Step 4: Be savvy where you stash it
Based on what you’re saving for, you may want to utilize different types of accounts. Consider the interest rates, risk and liquidity before depositing your funds. For your short-term savings goals and your emergency fund, keeping your money in an account where it’s easily accessible (like our Savings Account) and insured by the FDIC is typically best. But if you are saving for something more long-term, like college or retirement, it may be a good alternative to keep it in an account that offers tax incentives, like a 401(k), Individual Retirement Account (or IRA), or 529 plan, because they allow your money to grow tax-free until you withdraw it.
Step 5: Make it easier with automation
Once you start saving, keep your momentum going. Make it easier and faster to grow your savings by activating recurring transfers. This automatically moves money from your checking to savings, so you can simultaneously save toward your various goals without thinking about it and regardless of what interest rate changes occur.
Step 6: Save even more
Once you’re on your savings journey, you can rethink the ways you spend and save money to help you reach your goals faster:
Look for ways to microsave. Over time, tiny amounts will really add up.
Put up pictures of your savings goals around your house to keep you inspired.
Surround yourself with a savings tribe and encourage each other to achieve your financial dreams.
Create savings goals for milestone life events based on your age.
But remember, be patient with yourself. Saving is a lifelong habit and reaching your goals doesn’t have to happen overnight.
Saving for several goals at once sounds intimidating, but it doesn’t have to be. (And it certainly isn’t painful like a toothache!) Identifying financial goals with various timeframes and putting your savings on autopilot can set you up for success and help you enjoy some of the money you are earning now, while also saving for your bigger goals down the road. No dream is too big, and if you have a plan on how you’ll get there, anything is possible!
