Breakdown
How it works
The amount already saved grows with interest; the gap is filled by regular monthly deposits that also earn interest. Higher rates and longer horizons reduce the monthly requirement disproportionately because of compounding.
Formula
Gap = target − saved × (1 + r)ⁿ
Monthly = gap × r ÷ ((1 + r)ⁿ − 1)
Worked example
Target 20,000 in 3 years with 2,000 saved at 4%: 465 a month. At 0% interest it would be 500.
Frequently asked questions
Where should I keep savings for a goal under 5 years?
Cash — easy-access or fixed-term savings. Investing risks a fall just before you need the money.
Should I include interest in my planning?
Yes, but conservatively. Use today's easy-access rate and ignore any bonus period that ends before your goal.
How do I save faster?
Automate a transfer on payday, round up to the nearest 50, and put windfalls (bonus, tax refund) straight in. Each one-off adds (1 + r)ⁿ by the deadline.