Sporadically throwing spare cash into your savings account probably isn't the best way to achieve your financial goals. A savings plan can help you be more strategic and build in some accountability. Here are a few common examples of savings plans, plus concrete steps you can take to create a framework that actually helps you save more.
What is a savings plan?
A savings plan is a strategy that guides how you set aside money for specific financial goals. Whether it's a shorter-term goal, like saving for a vacation, or a longer-term one, like funding retirement, a savings plan could help you reach that objective by making room in your budget through intentional spending and saving. Clarifying your timeline and how much you need to save, as well as identifying the right type of account for your savings goal, are also critical components to a good savings plan.
Savings plan examples
Savings plans can look different from one another. Below are a few examples of popular savings plans that might work for you.
The 60/30/10+15 Plan Your Pay guideline
The 60/30/10+15 guideline, aka Plan Your Pay, offers a simple framework for how you allocate your money.
It all starts with your pre-tax income.
- 15% for retirement savings: This covers contributions to employer-sponsored retirement accounts, including any employer matching contributions, plus individual retirement accounts (IRAs) and even health savings accounts (HSAs) to cover the many qualified medical expenses now and in retirement.
Then divvy up your monthly take-home pay this way:
- 60% for essential expenses: Rent/mortgage, utilities, food, transportation, insurance, health care (including contributions to HSAs if you're using them to cover qualified medical expenses now), debt payments—the costs you must cover from day to day fall in this big bucket.
- 30% for nice-to-have expenses: These are the fun things in life that make saving feel less like sacrificing, such as dining out, streaming subscriptions, and hobbies. Charitable donations go under this umbrella too.
- 10% for near-term goals and emergency savings: Aim to save $1,000 or one month's worth of essential expenses, whichever is more. Then gradually build up to saving enough to cover 3 to 6 months of essential expenses. After that, keep saving and pull from this bucket to fund short-term goals, like saving for a vacation or car.
Zero-based budgeting
With zero-based budgeting, your goal is to assign a job to every dollar of your take-home pay. This way, you'll always know exactly where your money is going. By removing unplanned spending, zero-based budgeting can help free up funds to put toward your goals.
It works by listing out all of your monthly expenses, including regular bills, discretionary spending, and savings goals. Subtract each line item from your monthly take-home pay until you get to 0. If the result is a negative number, you'll have to reallocate some funds to get back in the black.
Savings challenges
A money savings challenge may not be as prescriptive as the first 2 plans, but it can help stoke your motivation to save. A few examples include:
- The 52-week money challenge, which has you set aside increasing amounts of money each week for your goal
- The 100-envelope challenge, which has you pick a random numbered envelope each week and set aside that designated amount of money
- The no-spend challenge, when you spend only on essentials for a specified amount of time, saving the rest of your income for goals
Benefits of having a savings plan
Adopting a savings plan has some key advantages:
- Predictable savings: When you put aside money on a set schedule, it's easy to forecast how much you can realistically save over a given time period.
- Financial stability: Knowing you have money saved for emergencies and are working toward reaching long-term goals, like having enough saved for retirement including health care expenses, can reduce your reliance on credit cards and bring down money-related stress.
- Manageable goals: Many financial goals, like retirement, involve large sums of money that can be overwhelming to think about. A savings plan can make big goals feel more achievable through steady progress.
- Potential for growth: Contributing to a high-yield savings account, cash management account, or investment account allows you to leverage compounding, when your earnings make their own earnings, to possibly grow your wealth faster.
How to create a savings plan
Here are some simple steps to make a savings plan that works for you.
1. Identify your goals and how much they'll cost
Some common savings goals include:
- Building emergency savings
- Saving for a house down payment
- Starting a family
- Saving for college
- Saving for retirement
Next, ask yourself how much money you ultimately need to save for each one.
2. Prioritize your goals
If you're working toward multiple goals, prioritize the ones that are most important to you. After you have $1,000 set aside for emergencies, you might want to tackle high-interest debt next. That way, you don't go further into debt from compounding interest. Not sure how to rank your goals? Here's how to set financial goals in priority order.
3. Establish your timeline
How many weeks, months, or years do you have to save to hit your goal? Your timeline will directly inform the frequency and amount you'll need to stash. It can also determine which strategies you use—including whether you decide to invest your savings, because you have more than 3 years to weather market ups and downs, or keep your money in a lower-risk account, because you have a shorter timeframe.
4. Break your savings target into smaller amounts
Let's say you're saving for a down payment on a home and want to buy in 5 years. Your budget for a home is $400,000, so your goal is to save $80,000 for a 20% down payment. To hit that goal, you'll need to save $16,000 each year, or $1,333.33 per month. That's still a lot of money each month, but it feels more doable than coughing up $80,000 all at once.
5. Choose the right account type
Depending on your goal, you may need quick access to your cash. Or you may be able to reap tax benefits to help your savings go further. Here are some goals and potential accounts or vehicles to consider:
- Emergency savings: Keeping funds easily accessible is important in case you need to draw on them in a pinch. Some options:
- A high-yield savings account, which may offer higher returns than traditional savings accounts.
- A cash management account, which also may offer higher returns than traditional savings accounts. Cash management accounts may also provide access to additional options like money market funds or certificates of deposit (CDs).
- Short-term savings: For goals under 3 years away, such as funding a big party or trip, consider these options:
- A short-term CD or brokered CD, where you agree to tie up your money for a set term in exchange for a fixed interest rate that is often higher than a traditional savings account at a bank, could be a solution for short-term savings.
- A credit union share certificate (CUSC) or brokered CUSC, which works similarly to CDs, but distributes credit union earnings in the form of dividends instead of interest. Because your money stays tied up for a fixed term here too, it may be more suitable for short-term goals rather than emergency savings you may need to draw on unexpectedly.
- A CD ladder, which allows you to invest in multiple CDs at a time with different maturity dates.
- Short-term bonds and bond funds.
- Retirement savings: Tax-advantaged growth is on the table if you save in a workplace retirement account, like a 401(k), or IRA.
- Health care savings: If you have a high-deductible health plan, consider a HSA. It allows for tax-deductible contributions, tax-deferred (or even tax-free) growth, and tax-free withdrawals for qualified medical expenses, a tax-saving trifecta.1
- Education savings: Consider the features of 529 plans and other accounts that can be used for this purpose.
- Other savings: Brokerage accounts offer access to a variety of investments, including stocks, bonds, index funds, mutual funds, and exchange-traded funds (ETFs). The investments in these accounts tend to carry more risk than CDs and CUSCs, but they may offer more growth potential, and you can use them to fund any goal.
6. Build savings into your budget
Now choose a plan that encourages saving. If money feels tight, you may need to find a way to make more money or cut expenses to get the numbers to work. Alternatively, you can adjust your savings target or your timeline to give your budget some breathing room.
7. Adjust as needed
Periodically check in to see how things are going. Seeing yourself make progress could help keep you going for the long haul. These check-ins can also give you the opportunity to tweak your budget and savings strategy if:
- Unexpected expenses come up
- You significantly lower or eliminate big expenses, like credit card debt or a car payment
- Your income changes
- Your financial goals change
Tips to help you reach your savings goals
The following tips can help you cross the finish line:
1. Name your accounts
If you're saving for multiple financial goals, consider opening separate accounts for each one—and naming each account for a particular goal. That's because you might be less tempted to withdraw from an account called "Dream House" than one called "Brokerage account No. 2."
2. Make recurring investments
Try automating your savings whenever possible. In practice, this might look like:
- Setting up automatic paycheck deductions to fund your retirement account, HSA, or FSA.
- Splitting your paycheck's direct deposit between your checking account and an investment account.
- Setting weekly or monthly automatic transfers from your checking account to your savings account or an investment account.
3. Track your spending
You might be surprised to learn where your money is going—and these revelations could help you trim your spending. Get in the habit of reviewing your debit and credit card statements. Some budgeting apps also make it easy to monitor your spending.
4. Put windfalls to work
When you receive a cash windfall—like an inheritance, work bonus, or tax refund—consider using that money to boost your savings. That can make a big difference in your savings rate and increase the chances you'll hit your goals.
How to start saving at Fidelity
If you're interested in working with Fidelity to hit savings goals, here are the steps to get started:
1. Choose an account
Check out Fidelity's account options, which generally don't have account fees or minimums to open an account. They include:
- Cash management accounts
- Brokerage accounts
- Individual or small business retirement accounts
- Custodial accounts
- 529 accounts
- HSAs
Not sure which to pick? Answer a few simple questions to get guidance from Fidelity's account selector.
2. Open an account
Once you know which account is best suited for your needs, go back to our all accounts page. Select "Open an account" under the relevant account, and follow the instructions to set it up. You'll need to enter personal details, such as your Social Security number and employment info, so keep that all handy. Fidelity will then verify your identity online in just a few minutes.
3. Fund your account
Link an account with cash in it, like a checking or savings account, and transfer money from that account to your new Fidelity account. This is the money you'll use to invest.
4. Choose investments
While you may be defaulted into certain lower-risk investments, other investments may have the potential for more growth. So it could help pay to select your own investments. To get even closer to your savings goals, you may choose to set up recurring investments. After deciding how much and what to invest in, plus a cadence for investing, you won't have to manually make moves again, unless you want to change something. If you want help choosing investments, you could work with a robo advisor or financial representative.