Lesson 4: Saving for Your Goals - Cheat Sheet
Saving Goals by Timeframe
Timeframe | Examples | Appropriate Savings Vehicles | Risk Tolerance |
Short-term (1-2 years) | Holidays, wedding, furniture, courses | Easy-access savings, Regular savers, Premium Bonds | Very low risk |
Medium-term (2-5 years) | Home deposit, car, sabbatical, business | Fixed-rate bonds, Cash ISAs, Regular savers | Low to medium risk |
Long-term (5+ years) | Children’s education, early retirement, property | Stocks and Shares ISAs, Lifetime ISAs, Junior ISAs | Medium to higher risk |
Savings Vehicle Comparison
Account Type | Interest/Return | Access | Tax Treatment | Best For |
Easy-access savings | 3-5% | Immediate | Taxable above PSA | Emergency fund, short-term goals |
Regular savers | 5-7% | Monthly deposits, limited withdrawals | Taxable above PSA | Building saving habit |
Fixed-rate bonds | 4-6% | Locked for term | Taxable above PSA | Medium-term goals |
Cash ISA | 3-5% | Varies by provider | Tax-free | Medium-term goals |
Stocks & Shares ISA | 5-9% (variable) | 3-5 days | Tax-free | Long-term goals |
Lifetime ISA | 25% govt bonus + interest/growth | Restricted to first home or retirement | Tax-free | First home, retirement |
Premium Bonds | 0-5% (prize-based) | 3-5 days | Tax-free | Alternative to savings |
Savings Calculation Formulas
- Lump Sum Needed: Target Amount
- Monthly Saving Required: Target Amount ÷ Months Until Target Date
- Savings Rate: (Amount Saved ÷ After-Tax Income) × 100
- Rule of 72: Years to double money = 72 ÷ Interest Rate Example: At 4% interest, money doubles in 72 ÷ 4 = 18 years
Automation Strategies
- Direct Debit: Set up automatic transfers the day after payday
- Separate Accounts: Use different accounts for different goals
- Round-Up Tools: Automatically save small amounts from transactions
- Payday Splitting: Ask employer to split direct deposit between accounts
- “Save First”: Transfer to savings before allocating spending money
Sinking Fund Categories
Category | Purpose | Typical Monthly Amount | Annual Total |
Car maintenance | Repairs, MOT, servicing | £50-100 | £600-1,200 |
Home maintenance | Repairs, improvements | £100-200 | £1,200-2,400 |
Annual insurance | Car, home, life policies | 1/12 of annual premiums | Varies |
Holidays | Travel, accommodation | £100-300 | £1,200-3,600 |
Christmas | Gifts, food, decorations | £50-100 | £600-1,200 |
Birthdays/Gifts | Presents throughout year | £30-50 | £360-600 |
Technology replacement | Phones, computers, appliances | £50-100 | £600-1,200 |
Psychological Savings Boosters
- Name accounts specifically: “Tokyo Trip 2026” vs “Savings Account”
- Visualize goals: Use images of your goal as device wallpapers
- Track progress visually: Use visual trackers you can color in
- Celebrate milestones: Reward yourself at 25%, 50%, 75% of goals
- Use social accountability: Share goals with trusted friends
- Frame as “paying your future self”: Shift from deprivation to investment
- Create a vision board: Visual representation of what you’re saving for