This savings goal calculator can help you figure out how much you will need to save on a regular/monthly basis to reach a certain savings goal you set up. There is in depth information on this topic below the form.
How does this savings goal calculator work?
This financial tool can help you discover which are the deposits required to reach a future value in your bank savings account.
People usually set up such goals and then try to figure out how much should they save on a monthly basis. To do so you have to clarify the following variables that are taken into account:
- How much do you want to end up in account? This is the goal you should have clear in mind when thinking on your savings plan.
- How many years do you plan to save in order to achieve your savings goal? In order words in how long do you expect to reach your target.
- How often are you willing to make regular deposits? It is usually monthly, but it can be from weekly to annually.
- Which is the average annual interest rate you expect to receive within the desired term? Practically this should be a fixed rate you expect to receive in average for your savings.
Once all these figures are clear this savings goal calculator can help you with the value you should be saving regularly as well as with the estimated interest earned and total principal saved.
The algorithm uses the following formulas that assume the interest rate is fixed over the chosen time frame and that the interest gets compounded monthly independent on the frequency you choose to save:
a) Calculate r = ((1+R/12)^(12/C)-1)*100
b) Find the estimated regular amount that need to be saved: RS = A(r*0.01)/((1+r*0.01)^n-1)
c) Estimate the total principal saved: TS = RS * n
d) Determine the total interest earned: TI = A – TS
How much to save to achieve $1,000,000?
Let's figure out how much will you need to save on a monthly basis in order to reach $1,000,000 in your savings account within a 20 years time frame if the interest rate is assumed to be 5%:
■ In order to reach you savings goal you will have to save/deposit on a Monthly basis an amount of $2,432.89 for the next 20 years.
■ Total principal you will have saved during the desired term is $583,893.77
■ Total interest you will have earned during this period is $416,106.2318 Apr, 2015