Savings goals & how to achieve them
From childhoods spent stashing pocket money to buy sweets or video games to teenage years putting money aside for the next big tech drop, many of us have been saving our entire lives. In 2020, average savings per person stood at £9,633, yet 6.5% of Brits have no savings at all*.
When it comes to savings, it’s easy to be overwhelmed by the number of things you could be saving for, from weddings and holidays to retirement and grandchildren. On this page, we explore each different type of savings goal and how you can go about achieving them.
What’s on this page
What are savings goals?
Setting savings goals is often the first step to achieving your dreams. While money can’t buy happiness, it does make many things possible, such as going on holiday, buying a home and paying university fees. These can all be considered savings goals, along with:
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What savings goals should you set?
The savings goals you choose will depend on your personal circumstances and financial situation. However, there are four common savings goals that the majority of people save for at some point during their lives. These include the following:
1. Saving for children
As you probably know, children are expensive. From the early days of nappies and toys right through to university fees, deciding to have children is essentially signing up for 18 to 20 years of spending much more money than you otherwise would.
That’s why people commonly set a financial goal around their children, which remains relevant throughout many different stages of their lives. If you’re a first-time parent, a children-based savings goal could help pay for prams, supplies and childcare, whereas parents with teenagers might use their savings goals to work towards buying their first car or paying for university.
In a similar sense, grandparents might also set savings goals to help financially support their grandchildren.
2. Saving for retirement
When you reach retirement age, you’ll hopefully have many years left to enjoy. However, to maintain your lifestyle and enjoy your favourite hobbies and leisure activities, you’ll need money.
There are many different ways to work out how much you might need to save for your retirement. One of these is having ten times your annual salary saved, while another is putting 10% of your earnings away each year from the age of 20.
Having your retirement fund in mind as a savings goal is a great way to save for the future and will help you pursue the lifestyle you’ve always dreamed of. This savings goal is one that will need to be tracked, amended and reconsidered as things like changes in salary, life expectancy and other economic factors come into play.
3. Building your emergency fund
If there’s one thing certain in life, it’s that things are bound to go wrong at least once. From expensive vet bills to car breakdowns, some things are inevitable. An emergency fund is the best way to protect yourself against these emergencies, and even against periods of unemployment should you lose your job. Having an emergency fund will prevent you from relying on your credit card, taking out a loan or dipping into any other savings. Essentially, an emergency fund is a pot of savings for a rainy day.
Ideally, your emergency fund should cover three to six months of expenses, which will differ from household to household, especially if there’s more than one of you living there. This is so that if you suddenly lose your job, you have money to keep paying your bills while you find another one.
Emergency funds can take time to save up for, which is why they’re a good savings goal to have.
4. A big purchase
By setting a savings goal for big ticket items, you can avoid taking out loans or accumulating debt, putting you in a much better position than if you were to borrow the cash.
With any big purchase, it’s important to assess your budget to see what you can afford to put aside each month, and therefore see how long it will take you to reach your savings goal. By taking the savings goal approach, you’ll earn interest and get those bigger items without financial stress.
How to set up savings goals
Decided on your goal and want to get started? There are a few steps you can take to set up your savings goal.
1. Give your savings goal a name
After deciding what it is you’re saving for, it should be easy to give it a name. This could be something like ‘America 2025’ or ‘Our Wedding’. By giving your goal a name, it becomes more personal to you and more likely to keep you motivated.
2. Calculate your monthly contribution
In setting your savings goal, there are three things you need to establish:
- How much you need to save
- When you want to save the money by
- How much you can afford to save each month
By answering those three questions, you can establish a realistic timeline and have an amount in mind to save every month. As an example, take a look at the scenario below.
Amy and Ben are getting married. They’ve worked out that their wedding is going to cost £20,000, and they have given themselves two years to save. To figure out the monthly cost, they can divide £20,000 by 24 months.
This works out at roughly £833.33 every month, which is about £417 each.
Amy and Ben will now need to review their monthly budget and take into consideration their household expenses to see if this is a manageable savings goal for them.
Tip: creating a budget plan gives you a good overview of your finances and helps you keep your savings goals on track.
3. Find the best place for your savings
After establishing a clear goal and knowing what timescale you’re working to, you’ll be able to shop around for a savings account that works for you.
You might want to consider an account that could accelerate your savings with the benefit of a competitive interest rate, such as a fixed rate bond, but keep in mind that if you are saving for an emergency fund you’ll want an account that lets you access your cash instantly, such as an easy access savings account.
The best account for you will likely depend on whether you have short-term or long-term savings goals, meaning it’s important to do your research.
Once you’ve chosen your savings account, check whether your bank has a specific savings goal service which allows you to give the account a name, choose a target amount and set a target date in order to keep you motivated and on track. You can often do this via your banking app from the comfort of your own home.
How to achieve your savings goals
Achieving savings goals can be easier said than done. If you’re easily demotivated or have a tendency to spend impulsively, you may find it difficult to save. However, the following tips could help you lock in your cash and hit your target.
Track your progress
Many apps and banking providers offer an integrated tracker on their savings goal services, but this is something you can easily do yourself. Designed to send you alerts and congratulate you on your progress, integrated trackers can be off-putting for certain savers, but they can be switched off.
Another way you can track your progress is to use your online banking service to check back intermittently on the amount in your account. Regular checks are also a good way to stay on top of any transactions and spot fraudulent activity.
Create visual reminders
There’s something to say for tangible, physical reminders and how well they can motivate you. By keeping a poster, note or image related to your savings goal around the house or at your desk, you’ll be reminded of why you started in the first place and have the motivation to keep going.
Set up a standing order
By putting your savings into an easy access savings account, there are usually no restrictions on how you access your money, or how often you top it up. By setting up a standing order that leaves your account on payday, you’ll automate the act of saving. This is also known as ‘paying yourself first’.
Choose an account that won’t allow you to spend the money easily
Thanks to the wide range of savings accounts available, you can choose one that works well for you and your saving style.
If you’re the type of person who finds it difficult to exercise self control, you might want to consider an account that lets you top up whenever you like, but places restrictions on when or how you can withdraw. A good example of this type of account is a notice account, which requires you to give a set period of notice before you can access your cash.
This is often enough of an inconvenience that you will end up doing without the cash, and therefore cuts down on unnecessary spending, allowing you to reach your savings goals faster.
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