Use our savings account calculator to figure out how much you need to put away each month to reach your savings goal.
What is a Savings Account?
A savings account is a type of interest-earning bank account that you can use to safely deposit money. You have the ability to withdraw your money when you need it, making it great for shorter-term financial goals like taking a vacation or buying a car.
It also works well for longer-term goals like buying a house, paying for your kids to attend college, or as a place to keep your emergency fund.
Most FDIC-insured financial institutions like banks and credit unions offer savings accounts. You can use a traditional bank or open an online savings account.
Savings vs. Investing
Although they have some similarities, there is a difference between saving money and investing it.
When you save money, you put aside cash for shorter-term future purchases like a car, vacation, or emergencies. It’s money you can access quickly with little or no penalty, and you don’t pay much in taxes on the minimal interest you earn on your savings account.
Investing, however, is putting money into things like stock, bonds, or real estate with the intention of making more money on those assets through interest or appreciation. There are many ways to invest. You can invest with apps, hire a financial advisor, or create an online brokerage account and manage your investments yourself.
You’ll invest for longer-term financial goals like retirement or paying for your children’s education. Taxes are generally higher on investments, and you typically can’t withdraw the money quickly or without penalty.
How Much Should You Save Each Month?
If you’ve taken the first step towards saving by opening an account, you might be confused about what to do next or how to start saving money. A good place to start is figuring out what you’re saving for and how much you need to set aside each month.
Write down your financial goals on a piece of paper or in a spreadsheet, along with the total amount you want to save.
For example, if you want to save for a new car, write “New Car” with $12,000 next to it. Keep doing this for all of your ideal savings goals. Then, check your savings account to see what interest rate it offers.
Take all of that information and plug it into our calculator, and you’ll know your monthly target savings amount and how long it’ll take you to achieve your goal.
There is no one rule for how much you should save each month. How much you put away depends on what you’re saving for, how much room is in your budget, and how quickly you want to reach your saving goals.
Remember that as your income, debts, and expenses fluctuate, you can adjust your monthly savings amount up or down. As that happens, check in with our savings calculator to figure if you’re still on track to reach your target.