Financial Tool: How Much Do I Need to Save for a Major Purchase?

So you’ve got your eye on a major purchase? Great! Whether it’s a new home, a car, or that dream vacation, planning ahead and saving smartly is key. Our financial calculator will help you figure out just how much you need to save each month to reach your goal.

Before you get started, make sure you have the following information on-hand:

After-Tax Savings Goal: This is the total amount you need to save after taxes. Be as specific as possible.
Current Savings: Include how much you’ve already set aside for this goal.
Savings Term: Decide how long you plan to save. This could be in months or years. For example, saving for a new car in three years means your savings term is 36 months.
Expected Interest Rate: If your savings will earn interest, estimate the annual interest rate. This helps you see how your money can grow over time.
Income Tax Rate: Consider the income tax rate that applies to your savings. This affects the net interest you earn.

With your information ready, plug it into a savings calculator to see how much you need to save each month.

Example Calculation

Let’s say you want to save $20,000 for a down payment on a house in five years. You currently have $5,000 saved. You expect to earn an annual interest rate of 3% on your savings, and your income tax rate is 25%.

After-Tax Savings Goal: $20,000
Amount You Have Now: $5,000
Savings Term: 5 years (60 months)
Expected Interest Rate: 3%
Income Tax Rate: 25%

You need to save $226.73 each month for 5 years in order to save $20,000.00 after-tax.

Using these inputs, the calculator will tell you how much to save each month to hit your target.

Review, review, review!

As you work towards your savings goal, regularly review your plan. Life happens, and financial situations can change. Adjust your plan as needed to stay on track. Consider setting up automatic transfers to your savings account to make consistent saving easier. With a little planning and smart saving, you’ll get where you want to be in no time.