Have your heart set on something slightly….expensive? Like a new phone, a pricey prom dress or an upcoming school trip? We know it can be overwhelming to think about laying out a lot of cash all at once. The good news? You don’t have to.
By understanding how much you need to save, and how much time you have to save it, you’ll be able to stash away small amounts of money that will eventually allow you to pay for that prom dress. The even better news? Once you get used to setting money aside to reach a smaller goal, like a new phone, you can use the same great saving habits to reach a larger one — like covering the cost of a first car or college.
When you’re deciding how to manage your money, keep the 50/30/20 rule in mind. You want to spend 50% of what you earn to look after the things you need (like someplace to live), 30% on the stuff you want (like that phone) and set 20% aside for the future (like college tuition). Since you’re likely lucky enough to have parents that foot the bill for necessities like food and shelter, you can think about putting more than 20% aside for the future and maybe a little more (don’t go nuts!) than 30% on a short-term goal, like that school trip.
Want to test the idea? Use the savings calculator below to find out how much you’ll need to set aside each month to reach one of your goals. Remember to consider how much time you have to save before you want to make the purchase.
Now that you know how much money you need to save each month, here’s how you can figure out how to earn it.
If a phone costs $300 and you want to buy it in 6 months, you’ll need to set aside at least $49.99 a month to be able to afford the phone at a 3% interest rate. If you have a part-time job or an allowance, you’ll probably be able to save that $49.99 a month for 6 months. If not, you might want to consider ways to earn that cash by doing extra chores around the house, picking up a babysitting gig or, if you’re old enough, finding a more official job at a store or restaurant.
If you’re saving for something a little larger, like a plane ticket that costs $800 for a trip you want to take in a year, you might consider setting your money aside in an account that earns a higher interest rate.
The best part of all of this? You’ll learn, firsthand, that breaking down the total cost of the stuff you want, and when you want to buy it, makes reaching your goals attainable — and not overwhelming at all.
Have you ever saved for a short-term (or medium-term) goal? What was it and how much did you have to save? Do you have any advice for someone just starting in the savings game? Share your story in the comments!