Part of our guide to The 50/30/20 Budget Rule
Most savings calculators answer "what will I have?" This one answers the more useful question: what must I put aside to get there.
The monthly contribution needed to reach a target by a chosen date, given what you have already saved and an assumed return — and how much of the final figure comes from you versus from growth.
How the calculation works
It is the compound interest formula solved for the contribution rather than the balance:
FV = P(1+r)ⁿ + PMT · [((1+r)ⁿ − 1) / r]Rearranged for PMT:
PMT = (target − P(1+r)ⁿ) · r / ((1+r)ⁿ − 1)Your existing balance is grown forward first; the contribution only has to cover what is left. A zero return is handled separately — the formula divides by zero there, and the answer is simply the shortfall divided by the months.
If the starting balance alone reaches the target, the calculator says so rather than returning a meaningless negative contribution.
The test suite verifies this by round-trip: the contribution it returns, fed back through the compound interest calculation, must land on the target.
How to read the result
The split matters more than the total. On a short horizon almost everything is your own money. On a long one, growth does an increasing share of the work — and that shift is the entire argument for starting earlier rather than saving harder later.
Try a lower return. If the plan only works at an optimistic rate, it is fragile. A goal that survives a pessimistic assumption is a plan; one that needs a good decade is a hope.
Time is the strongest lever. Extending the deadline reduces the monthly requirement far more than any plausible improvement in return.
Important considerations
Match the account to the horizon. Money needed within a few years does not belong in something that can fall 30% the month before you need it. The return you assume should reflect where the money actually sits.
Inflation erodes the target, not just the return. If you are saving for something whose price rises, either raise the target or use a real return.
Fees compound against you exactly as returns compound for you.
Related tools and reading
- Compound interest calculator
- 50/30/20 budget calculator
- Compound interest, explained with the actual numbers
- The 50/30/20 budget rule
This is general information, not financial advice. Returns are not guaranteed — see our disclaimer.
Frequently asked questions
What return should I assume?
For money you need within a few years, assume little or none — it belongs somewhere safe, and market returns are not dependable over short horizons. For longer goals, run it at several rates and see how much the answer moves.
Why does the required amount fall so much with more time?
Because contributions are linear and growth compounds. Doubling the horizon more than halves the monthly requirement, and that gap widens the higher the return.
Should I subtract inflation?
If the target is a future purchase whose price will rise, yes — use your return minus expected inflation, or raise the target instead. Otherwise you are saving for today's price with tomorrow's money.
What if I cannot afford the monthly figure?
Three levers, in order of power - extend the deadline, lower the target, or increase the starting balance. Raising the assumed return is not a lever; it is a wish.
Does this account for tax on the growth?
No. In a taxable account the effective return is lower, so treat the result as the optimistic end.
Sources
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