One of the basics of building a strong financial foundation is saving money. If you find yourself struggling to put money away every month, one strategy that may help is creating savings goals. Defining what things you’re saving for and consistently working toward each of those goals will help you achieve success.
Here we’ll go over some tips on how to set, track and meet your savings goals.
Savings goal statistics
- Americans’ top financial goals for 2023 include paying down debt (19 percent), budgeting better (16 percent) and saving more for emergencies (13 percent).
- Less than half of people (43 percent) say they would be able to pay for an unexpected $1,000 expense from their savings.
- Just over one quarter (26 percent) of those who pay monthly checking account fees said they would save for a major financial goal if they didn’t have to pay those fees.
- One-third of consumers say they’re not currently saving any money, and 60% of this group have no savings at all.
- More than three-quarters of consumers (78 percent) had specific financial goals or rough ideas of such goals in 2022, while 71 percent reported being somewhat or very likely to set financial goals in 2023.
Sources: Bankrate’s personal finances outlook survey, Bankrate’s emergency savings report, Bankrate’s checking fees survey, PYMNTS, Lincoln Financial Group survey
1. Choose a specific savings goal
First, define your goal. Whether it’s a vacation, a college education for your kids, a down payment on a house, or retirement, decide what you’re working toward rather than choosing a nebulous number or a vague idea of saving more money.
“Find out what you want your money to do for you,” says Amy Irvine, CFP, owner of Rooted Planning Group. “Have the emotional conversation with yourself about your money and what you hope it accomplishes.”
— Amy IrvineCFP, owner of Rooted Planning Group
Whether you’ve set one goal or multiple, decide how much money to save toward each of them on a monthly basis. Part of this decision involves determining when exactly you’ll need the money for each of your goals.
It helps to have a budget when figuring out how much you’ll be able to save for your goals each month. This way, you’ll know how much money is left over after you’ve factored in essentials like housing, transportation, food and utilities.
2. Set a savings deadline
Next, set a timeline for accomplishing your goal. Some goals, like buying a car next year, might be shorter term. Other goals, like reaching your retirement number, might take longer and require more ongoing planning.
“Setting yourself up for success means a plan and a schedule,” says Ari Baum, CFP, founder and CEO of Endurance Wealth Partners. “Figure out your monthly or weekly contributions to reach your goals.”
If you know you need $10,000 to buy a car next year, you may need to set aside $833 a month for the next 12 months. For retirement, you can use a calculator to estimate how much you need to invest to hit your retirement savings goals.
Alternatively, if you’re on a tight budget, determine how much you can afford to save each month and then decide realistically when you’ll be able to meet your goal. Keeping your money in a high-yield savings account can help you meet your savings goals faster than a lower-earning account.
3. Create a different account for each goal
Baum also recommends setting up different savings accounts for each goal, since it’s likely you’re saving for more than one goal at a time.
“Saving for multiple goals can make things tricky,” Baum says. “Break down each savings goal into an account, whether it’s for a car, house, vacation or anything else.”
That way, you can decide how to divide your resources into the accounts based on your savings timeline and the amount you need to reach your goals.
In some cases, you might have to prioritize some goals over others. For example, before increasing the amount you put toward a child’s 529 college plan, make sure you’re meeting your retirement savings goal. If you need a new car, you might need to prioritize that savings goal over putting more money toward a vacation. Think critically about where your money needs to go first and work from there.
Bankrate’s take:The FDIC insures up to $250,000 per depositor, per FDIC-insured bank, per ownership category. For big savers, having accounts at multiple banks can help keep your money safe.
4. Track your goals
Keep track of your progress for each goal by taking a look at your accounts at the end of every month to confirm you’ve saved the amount you planned. Make adjustments as needed to ensure the amount you wish to set aside for each goal is realistic. If need be, determine whether there are places in your budget — such as entertainment or dining out — where you can trim spending to meet your savings goals.
One way you can track your progress is by using a spreadsheet. It can be part of a monthly budget in which you create spending categories for rent/mortgage, utilities, groceries, entertainment and so on. Also include categories for saving for each of your goals.
If manually tracking your savings for each goal sounds complicated or time consuming, consider automating the process with a budgeting app. Mint is an app that enables you to set savings goals and tailor your budget to meet them. Goodbudget is an app based on the old-fashioned envelope budgeting method, and users are able to create a category for savings goals.
“Once you get the ball rolling, saving money can become addictive,” Baum says. “It’s fun to watch your savings pile up as you make contributions over time.”
5. Break your goals down into smaller chunks
Rooted Planning Group’s Irvine recommends breaking down your goals into smaller chunks so that you can feel more empowered to reach your goals.
If you want to take a great vacation for $5,000 in 12 months, you need to set aside around $416 each month. For some savers, though, that can feel like a daunting task. Breaking that down into a weekly contribution of around $104 may make it seem more manageable, and you can look for ways to cut back on your spending to hit that target.
“Identify where and how you’re spending money in a way that isn’t serving you,” Irvine says. “With that knowledge, you can take different actions to find the money you need to meet your goal.”
Whether or not you choose to break larger goals down into smaller, more manageable ones, having a financial plan and goals can be good for one’s confidence. A Charles Schwab Modern Wealth Survey found that 65 percent of those who have a written financial plan reported feeling financially stable, and 54 percent of those with such a plan felt “very confident” they would reach their financial goals.
6. Automate your goals
Rather than trying to remember to set aside money for a goal, consider using automatic transfers and deductions. You can create automatic transfers from a checking account to a savings account to occur on the same day each week or month, so you don’t have to remember to make the transfer each time.
Brian Walsh, Jr., CFS, and senior financial advisor at Walsh & Nicholson Financial Group, says that automatically moving the money helps it stay out of sight so you don’t spend it.
Walsh also recommends using an investment account when it makes sense for your situation.
“Set up an investment account, whether it be a Roth IRA, IRA or brokerage account, and have a set dollar amount going into that account each paycheck,” he says. “You can set up your bank account to automatically transfer to the investment account.”
— Brian Walsh, Jr.CFS, and senior financial advisor at Walsh & Nicholson Financial Group
While you might not feel comfortable using an investment account for shorter-term goals like vacations and down payments, automating your transfers can be a big help. When it comes to investing for retirement, though, you can have your money taken directly from your paycheck.
It’s important to remember that you have automatic transfers set up, and for which accounts, so you don’t end up over- or under-saving for your goals.
Bottom line
Setting up savings goals is a way to help ensure you’ll have the money for things you want or need. After defining what you’re saving for and when you’ll need the money, it’s important to track your progress every month. This can be part of a regular budgeting process, whether you’re using pen and paper, a spreadsheet or a handy budgeting app.
Ultimately, having defined savings goals can help you save money more quickly and afford the things you want while staying financially healthy and keeping out of debt.
)
