When you make the smart decision to start saving — whether it’s for a future purchase, to have an emergency fund or any other reason — reaching your goal can be made much easier by plugging some data into a savings calculator.
It’s also kind of fun. You get to watch how your money will grow, and you get a target date to count down to.
The Bankrate.com savings calculator, for example, asks for the basics: How much do you want to save, how many years you plan to save, what is the amount of the initial deposit you can make and what interest rate you expect.
Enter your data and you get your date. The savings calculator will tell you how much you need to deposit each month and even breaks it down into how much that translates per day, which allows you to balance your savings goals versus everyday throwaway expenses, like that quick latte you may be accustomed to buying every morning.
With a plethora of places to park your money, from CDs to bank savings accounts, it pays to research a bit to find a reasonable interest rate. A CD calculator helps you figure out an annual percentage yield, or APY, which will allow you to compare rates at competing institutions.
Who wants to be a millionaire?
Savings calculators offer a clear path on how your money can grow and give you an actual end date, and that can be a psychological boost. Knowing that the reward will come by a certain time helps many people stick to their savings plans.
And while it makes good financial sense to use a savings calculator to plan for college, buying a house or an exotic vacation, they can also be interesting to use for other goals. Another savings calculator, for instance, shows you how long it takes to save $1 million.