How to set a savings goal 

Key takeaways

• Structured planning can help you save. Savings goals provide structure when planning how to save for a new home
• Clear savings targets can make tracking easier. A clear target can make it easier to track progress and review affordability
• Suitability for budgeting may differ. Budgeting techniques can support saving, but suitability will vary by individual
• Review savings plans regularly. Savings plans may need to be reviewed as your circumstances change

Why setting a clear savings goal matters

Savings goals help to set out how much money is being saved for and over what period. Without a defined goal, it can be harder to assess your progress or understand whether your current saving levels are sustainable.

If you’re saving for a new home, a clear goal can also help frame decisions around timescales, location and property type. It may support your wider financial planning, such as understanding how much to budget for a new home and how savings fit alongside other financial commitments. However, outcomes will vary depending on your income and other factors, like savings account interest rates.

Common considerations when setting savings goals

Setting savings goals often involves reviewing your personal finances, priorities and timescales. Below, we outline some common considerations when defining a savings goal.

Identify what you’re saving for

The first step is identifying the purpose of your savings. This could be a deposit for a new home, which is one of the highest costs to consider when buying a new home. However, saving enough to also cover legal fees, surveys and general moving expenses can help with budgeting.

Calculate the total amount you need

Having a target amount in mind can help you set a savings goal. Estimate how much may be needed overall and check if this is achievable, based on your current income and outgoings. Using a budget planner can help you get a clearer picture of your finances.

Review your income and outgoings

Reviewing your income and outgoings can help you build a clearer picture of your affordability and make adjustments to reach your savings goals. Consider the following:

• Monthly income
• Living costs, such as rent and household bills
• Spending on non-essentials such as subscriptions and dining out

Understanding these figures can help you determine how much you can realistically afford to save. This information can also inform how to budget for a new home, although individual circumstances and priorities will differ.

Set a realistic timeframe

Some people find it helpful to set a timeframe for their savings goal. This timeframe can be used to estimate how much you need to save each month based on your total target amount. Timeframes may change if income, expenses or priorities change.

Break down your goal into manageable targets

Larger savings goals may be divided into smaller, more manageable amounts. Tools like budget planners or automated savings features through online banking apps may be useful. These methods can help you track and manage your savings, but they are not appropriate for all situations and may need to be adapted.

Choose a method to track your progress

Tracking savings may involve checking your accounts periodically or using tools or apps to monitor your spending. Some banks also offer features such as separate savings pots or rounding up transactions. These tools can help you to keep money intended for a house deposit separate from your everyday spending. However, availability and suitability may vary between providers.

Small changes that can support your savings goals

Making small adjustments to your spending can help you reach your savings goals. Small, consistent changes can affect the amount you’re able to save over time. You might want to consider changes such as:

• Cutting down on eating out. Preparing lunches at home rather than buying lunch daily may reduce your monthly spending
• Balancing social activities. Trying a mixture of at-home activities as well as going out may lower your costs related to food, drinks and transport
• Reviewing subscriptions. Cancelling subscriptions and services that you no longer use can free up additional funds for saving

Budgeting techniques to help you stay on track

Budgeting techniques are often used to monitor spending and saving. A budget can help you track income, regular outgoings and discretionary spending, providing a clearer overview of your finances. Different budgeting techniques may be used to structure your saving, including:

• 50/30/20 budgeting, where 50% of your income is allocated to your needs (e.g., bills and fixed expenses), 30% to your wants (e.g., discretionary spending) and 20% to savings
• 80/20 budgeting, where 80% of income is used for all your monthly spending (including fixed expenses and discretionary spending) and 20% is allocated to savings

There is no single approach that suits everyone and your budget may need to be reviewed if your circumstances change.

How to adjust your savings plan when life changes

Changes in circumstances, such as variations in income, living costs or personal commitments, may affect your savings plans. In these situations, you may choose to review your savings goals or adjust your monthly contribution levels.

Making changes does not necessarily mean abandoning a goal. Reviewing targets, timeframes or budgets can help your plans remain realistic. Flexibility is an important part of managing savings over longer periods.

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Disclaimer:

This article is for general informational purposes only and does not constitute professional advice. Please speak with a mortgage, financial or legal adviser for more information regarding your specific circumstances.