Money·4 min read

theSkimm on Setting Realistic Savings Goals

realistic savings goals
Design: theSkimm | Photo: iStock
October 28, 2021

The Story

If you listened to your parents, you know money doesn't grow on trees. But it can grow in the bank. That's why saving should be at the top of your financial to-do list.

That’s why I’m here.

Let’s go. Start by looking at your personal stats: how much you make, how much you spend, and how much you currently save. Keep those numbers in mind as you set your goals.

Some important ones to check off your list first: creating an emergency fund (because life is full of expensive surprises), paying off high-interest debt (because it’s dragging you down) and investing for retirement (because who wants to work forever?). After that, it’s time for the fun part.

Not sure ‘fun’ and ‘savings’ belong in the same sentence.

Thinking about all the things you want to do in life IS fun. Saving is how you make those dreams your reality. Want to take a dream trip? See what flights, hotels, and activities usually cost. Trying to buy a home in five years? Research prices in your ideal area to figure out a good down payment goal.

Once you’ve decided what you want, when you want it, and what it’ll cost, do some math to come up with a monthly or weekly savings target. Because research says breaking your goal into smaller goals can make it feel less overwhelming. Example: saving $1,000 might sound like a lot, but $100 a week for 10 weeks? Probably sounds more doable. And you can bump this up over time as you start making more or regularly spending less.

break down $1000 savings goal
Design: theSkimm | Photo: Alamy

Got it. What’s next?

Picking the right account. Ideally you should have a separate one for each goal. Having one big savings pot makes it too easy to use money on the “wrong” thing.

Here are some options:

  • Savings and money market accounts: perfect for money you need soon-ish, like for a road trip or to decorate a nursery. The sooner you need the money, the more liquid (easily accessible) it should be. Pro tip: see if your bank offers free sub-accounts for each of your short-term goals. Oh, and shop around to compare interest rates. Online banks usually pay more than brick-and-mortar ones.

  • CDs: aka certificates of deposit – basically, savings accounts that generally pay more interest IF you don’t withdraw the money for a certain amount of time. Go rogue and you could pay a penalty, like a few months’ interest.

  • 401(k), IRAs and other retirement accounts: for money you’ll live on after you stop working. Don’t touch it till then. In most cases, you’ll pay penalties for withdrawing it early.

  • 529: where you invest money for future education costs so the tuition (yours or someone else’s) doesn’t bankrupt you. You can make qualified withdrawals tax-free.

  • Regular investment account: for goals at least a few years away. Unlike a retirement account, you can sell investments whenever you want – penalty-free. Taxes may apply. Just keep cool if your balance fluctuates. That’s normal. Over the long term, overall stock prices have always gone up. A longer investing timeframe lets you ride out those short-term ups and downs.

When do I actually start saving?

Now. Take a look at your recent bank and credit card statements to spot places to trim your spending. Ideally, you’ll save 20% of your take-home pay for future you. But saving anything is good. Cutting one $10 expense every week will add up to more than $500 in a year.

Set up automatic transfers to take the willpower out of saving. And think about hanging up a photo that represents your goal – a home, beach scene, whatever motivates you – to remind yourself why you’ve decided to save instead of buying more wine. For real...researchers say that helps.


Saving can help you afford the life you want. Saving successfully starts by naming your goals and making a plan to reach them.

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