What are savings goals and how do you set them?
Learn what savings goals are, how to set a target amount and target date, where to keep your money, and how to track several goals at once.
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Summary
A savings goal is a specific amount of money you plan to save for a clear purpose by a certain date, like an emergency fund, a new car, or a down payment on a home.
Clear savings goals turn broad financial goals into steps you can track, which can make it easier to stay motivated.
Setting a goal usually means picking a target amount, choosing a target date, and working out how much to set aside from your monthly budget.
Where you keep your savings matters. Savings accounts, money market accounts, and certificates of deposit work differently than investment accounts that hold stocks and bonds.
With OnePay, you can create up to three savings goals at once in the app, so you can track several priorities side by side.
Deciding you want to save money is a great first step. But without a clear target, it's easy for that plan to fade as everyday costs pile up. That's where a savings goal comes in. When you name what you're saving for, how much you need, and when you need it, you give your money a job. This guide explains what savings goals are, the different types, how to set them, and how tools like automatic savings, transfers and separate goal trackers can help you stay on course.
What is a savings goal?
A savings goal is a specific amount of money you want to set aside for a particular purpose by a certain date. It has three basic parts: what you're saving for, your target amount (the total you want to reach), and your target date (the day you'd like to reach it).
For example, “save $1,200 for a trip by next June” is a savings goal. “Save more money this year” is more of a wish, since it doesn't say how much or by when. Adding those details gives you a savings target you can measure, which makes it easier to see whether you're on track.
Savings goals are a building block of personal finance. They connect your bigger financial goals, like feeling secure or owning a home, to the small choices you make with each paycheck.
Why savings goals matter
Having a goal gives your savings a clear purpose. When you know exactly what the money is for, it can be easier to skip impulse purchases and set money aside instead. The Consumer Financial Protection Bureau (CFPB) lists setting a goal as a key step in building a savings habit.
Goals also help you plan. If you know you'll need a certain amount by a certain date, you can work backward to figure out how much to save each week or month. That turns a big number into smaller, more manageable steps.
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Types of savings goals
Most savings goals fall into two groups based on how soon you'll need the money.
Short-term financial goals
Short-term financial goals are things you hope to pay for within the next few years. Common examples include:
An emergency fund: Money set aside for surprise costs, like a car repair, a medical bill, or a gap in income.
A vacation: Saving ahead of time can help you avoid putting travel costs on credit cards.
A new car or big purchase: Saving for a new car, a laptop, or furniture ahead of time can lower how much you need to borrow.
Long-term goals
Long-term goals usually take five years or more to reach and often involve larger amounts of money. Examples include:
Buying a house: Many people save for years to cover a down payment, which is the part of a home's price you pay upfront, plus closing costs.
Saving for retirement: A retirement plan, like an employer 401(k) or an individual retirement account (IRA), is designed to help you save for life after work.
Education: Setting money aside for your own or a child's future schooling.
Because long-term goals have more time to grow, where you keep the money can make a big difference. More on that below.
How to start saving for a goal
If you're wondering how to start saving toward something specific, these steps can help you build a simple savings plan.
Decide what you're saving for
Start by naming the goal and being as specific as you can. “Emergency fund” is a good start. “Three months of rent and bills for emergencies” is even better, since it tells you exactly what the money needs to cover.
Set a target amount
Next, figure out your target amount. For a purchase, this might be the price plus taxes and fees. For an emergency fund, it might be a few months of essential costs. Your target amount is the finish line you're working toward.
Pick a target date
A target date gives your goal a timeline. Once you have both an amount and a date, you can divide the amount by the number of months left to see how much to save each month. For example, if your savings target is $3,000 in 12 months, you'd need to set aside $250 a month.
Use a savings goal calculator
A savings goal calculator can do the math for you. The U.S. Securities and Exchange Commission's Investor.gov site offers a free savings goal calculator that can help you estimate how much you may need to set aside to reach a goal.
Fit it into your monthly budget
Your goal needs a spot in your monthly budget. Look at your income and regular expenses to see how much you can realistically set aside. If the monthly amount feels too high, you can push back the target date or lower the target amount. A goal you can stick with is usually more useful than one that only looks good on paper. Reading up on how much to save per month can also give you a starting point.
Set up automatic transfers
Automatic transfers move a set amount from your checking account into savings on a schedule, such as every payday. Because the money moves before you have a chance to spend it, automating your savings can make it easier to stay consistent.
Where to keep money for your savings goals
The best place for your savings often depends on when you'll need the money. Money for short-term goals is usually kept somewhere safe and easy to reach. Money for long-term goals may have more time to grow.
Savings accounts
A savings account is a deposit account for money you don't plan to spend right away, and it usually pays interest. The interest rate is the percentage the bank pays you for keeping your money there. Traditional savings accounts at many banks pay lower rates. A high-yield savings account typically pays a higher rate, which can help your balance grow faster.
When you compare accounts, the annual percentage yield (APY) is a helpful number to check. APY shows how much interest you'd earn in a year, including the effect of compound interest. Compound interest means you earn interest on your original deposit and on the interest you've already earned.
Money market accounts and certificates of deposit
A money market account is another type of deposit account that pays interest and may let you write a limited number of checks. Certificates of deposit (CDs) work a bit differently. According to the FDIC, you typically need to keep money in a CD for a set period, and taking it out early can mean paying a penalty or losing interest. In exchange, CDs often pay a higher rate than regular savings accounts. Some savers use CDs for goals with a fixed target date, since they know when they'll need the money.
Investment accounts
For long-term goals like saving for retirement, some people use an investment account, such as a brokerage account or a Roth IRA. These accounts can hold stocks, which are shares of ownership in a company, and bonds, which are loans to a government or company that pay interest. Investments may grow over time, but their value can also go down. Unlike money in a deposit account, stocks and bonds aren't covered by FDIC insurance.
A Roth IRA is one kind of retirement account with tax benefits. According to the IRS, Roth IRA contributions aren't tax deductible, but qualified distributions aren't included in your income.
How to manage more than one savings goal
Most people are saving for more than one thing at a time. You might be building an emergency fund while also saving for a trip and putting money toward retirement. A clear savings strategy can help you balance them. Here are a few common approaches:
Rank your goals: Decide which goals matter most right now. Many people start with an emergency fund, since it can keep a surprise expense from turning into debt.
Split your savings: Instead of saving for one goal at a time, you can divide each deposit across several goals. For example, you might put half toward an emergency fund, 30% toward a new car, and 20% toward a vacation.
Keep goals separate: Tracking each goal on its own makes it easy to see how close you are to each finish line.
Factor in high-interest debt: Carrying a balance can work against your savings. Investor.gov notes that most credit cards charge high interest when you don't pay the full balance each month, and few investments earn enough to match that cost.
It also helps to revisit your goals every few months. As your income, expenses, or priorities change, you can adjust your amounts and dates.
How OnePay savings goals can help
If you bank through OnePay, you can use Savings goals to organize your money around what matters to you. When you open a OnePay deposit account, you automatically get a Checking section for everyday spending and a Savings section for money you plan to keep.
Your Savings section includes your Primary Savings, and you can create up to three goals to track progress on different priorities at the same time. Money in your Savings section earns interest.
Running several goals at once means you can keep an emergency fund, a vacation fund, and a new car fund side by side, each with its own name and balance. That makes it easier to see where your money is going and how close you are to each target.
Frequently Asked Questions
A savings goal is a specific amount of money you plan to save for a set purpose by a set date. Examples include an emergency fund, a vacation, or a down payment on a home.
Start by deciding what you're saving for. Then choose a target amount and a target date. Divide the amount by the number of months until your date to find your monthly savings target, and build that amount into your budget.
Short-term goals are usually things you plan to pay for within a few years. Common examples include building an emergency fund, saving for a vacation, or setting money aside for a new car or appliance.
Long-term goals often take five or more years to reach. Examples include saving for a down payment on a home, paying for education, and saving for retirement.
It depends on your income, expenses, and how soon you need the money. A savings goal calculator can help you estimate how much to set aside each month to reach a target amount by a target date.
Yes. Many people save for several goals at once, like an emergency fund and a vacation. You can split each deposit among your goals or rank them by priority. In the OnePay app, you can set up to three goals in your Savings section.
Money for short-term goals is often kept in a savings account, high-yield savings account, or money market account, where it's easy to reach. Longer-term goals like retirement may use investment accounts, which carry more risk but have more time to grow.
The interest rate is the base rate an account pays. APY, or annual percentage yield, shows how much you'd earn in a year once compound interest is included. That makes APY useful for comparing savings accounts.
A CD usually pays a set rate for a set term, like six months or a year. Taking money out before the term ends can lead to a penalty, so CDs are less flexible than a regular savings account. They can line up well with goals that have a fixed target date.
Automatic transfers move money into savings on a regular schedule, so you don't have to remember to do it. Because the money is set aside before you can spend it, many people find it easier to stay consistent.