How To Set Savings Goals

Whether you’re planning your dream holiday, working towards a new home or putting money aside for a rainy day, saving money is always worthwhile. 

We understand managing multiple savings objectives at once can feel daunting. Establishing a clear savings plan can ease the stress and provide a structured approach to managing your finances. By defining targets, you can focus your efforts and enjoy getting closer to your savings goals.

But what exactly are savings goals, and how do you set them up? This guide walks you through everything you need to know, with insights to help you create clear financial goals.

What are savings goals?

Savings goals are specific financial targets or objectives set by you, clearly marking out a particular purpose you’re saving money for. They help you focus on building a financial reserve for the future.

You can split savings goals into three categories with different timeframes:

• Short-term savings goals – Saving for expenses or activities within the next few months to a year, such as a holiday or a new gadget.
• Medium-term savings goals – Saving for expenses within the next few years, such as a new car, wedding or home improvements.
• Long-term savings goals – Saving for significant life events over an extended period, such as buying property or retirement. 

You may also wish to set up an emergency funds savings goal to cover any unexpected expenses, like medical bills, car repairs or if you lose your job.

Having clear savings goals can help your overall financial well-being. The best part? They’re simple to set up with our four-step process. 

Step 1: Identify your savings goals

The first thing to do is identify what your savings goals are. Consider short, medium and long-term goals and think about what you want to achieve in specific timeframes. 

Jot down your ideas. It could be anything, from simply saving funds for Christmas to putting money aside for home repairs or renovations. 

The key thing is to pick savings goals that excite you. That way, you’ll be more inclined to stick to your savings plan and achieve your financial goals. 

It can help to name each goal to make them more personal to you (e.g. ‘Australia 2025’ or ‘New Kitchen’). 

Step 2: Work out how much you can save each month

After establishing your savings goals, calculate how much money you can put into your savings account each month. It could be useful to review incomings vs outgoings to identify what an affordable monthly saving amount is. Monthly contributions will vary depending on your circumstances.

One way to calculate your monthly contribution is by creating a budget plan. This gives you a snapshot of your finances, highlighting your income, how much you’ll spend per month and how much you can stash into your savings. 

The 50/30/20 and 80/20 budget rules are easy to follow; you can find more information about how they work in our budgeting guide . 

Step 3: Establish a savings plan timeframe

When you’ve calculated how much money you can afford to save each month, the next step is to figure out timeframes for your savings goals.

The simplest way to establish timeframes for savings goals is by considering two key factors, which are:

• How much you can contribute per month
• The total amount you need to save

By doing this, you can set a realistic deadline for your savings goal.

For example, imagine you’re saving for a new car. You know the car will cost £12,000, and after creating your budget plan, you’ve worked out that you can put £500 per month into your savings account. This gives you a 24-month timeframe on your savings goal.

Step 4: Automate the process

Once you’ve got a crystal-clear picture of what you’re saving for and how much you can save per month, set up an automated savings process. This cuts the hassle of manually transferring funds each month, as your money automatically moves between accounts.

The easiest way to do this is to create a standing order, ensuring regular transfers between your current account and a savings account like a Saga Cash ISA or Saga Easy Access Savings Account, provided by Goldman Sachs International Bank.

Ideally, set up your standing order for payday or when your pension is paid – that way, you’re prioritising paying yourself first. 

You can even give the standing order a name that reflects your savings goal. Doing so can help you connect emotionally with your savings goal, and you may find yourself less tempted to spend elsewhere. If you have extra money at the end of the month, consider topping up your savings.