Here is a straightforward plan to help you save $10,000. Use it to boost your own savings and meet your financial goals!
$10,000 is a perfect savings goal. It’s a beautiful number. It’s a large amount of money without being unattainable. It’s the ideal starting point for your first “big” savings mission.
But like most great ideas, the execution is hard part. It’s one thing to want to save $10,000, but how do you actually go about doing it?
How to Save $10,000
Saving $10,000 is probably easier than you think. Here are a simple series of steps to make it easy:
- Determine what you’re saving for
- Choose when you want to save this money by
- Set up a dedicated high-interest savings account
- Calculate how much you need to save each week or month
- Set up an automatic transfer from your chequing account to your savings account
That’s it! Once you get these steps underway, your $10,000 will almost save itself. Below we’ll go into detail of how to execute your plan.
However, I also have some bonus tips to help you along the way. To add to the list above, I would also say:
6. Focus on getting your first $1,000
7. Look for a side hustle to add at least $100 per month to your savings
1. What are you saving $10,000 for?
You can do anything with the right motivation, and that includes saving $10,000. Maybe it’s your Emergency Fund or starting your Retirement nest egg, so saving $10,000 will make you feel super saving and secure.
Maybe it’s for an around the world vacation or a down-payment on a house, so saving $10,000 means accomplishing a major bucket list item for yourself. Whatever your motivation, get super clear about it and write it down. You’ll need to remind yourself of why it’s so important when other wants crop up and tempt you to spend what you’ve saved!
2. Choose your savings timeline
You should make your goal to save $10,000 in 1 to 3 years. To save $10,000 in one year, you’ll have to set aside about $830 per month.
If that seems like too much, double your timeline to 2 years, and you’ll only need to squirrel away $417 per month. You can save $10,000 in 3 years by setting aside approximately $278 per month.
How much does it actually take to save $10,000 in x years?
If you can earn an average rate of return of 5%, you would need to save:
- $814.41 per month for 1 year
- $397.05 per month for 2 years
- $258.05 per month for 3 years
- $188.63 per month for 4 years
- $147.05 per month for 5 years
Earn a lower rate of return and you’ll need to save more, higher and you can save less. Any of the above might still seem like a lot of money, so the next question to ask yourself is will there be any cash-windfalls during that time?
For example, if you’re expecting a refund when you file your income taxes or will receive a bonus at work, you could add that to your savings and it will get you to your goal faster.
3. Set up a dedicated high-interest savings account or investment account
You might want to amass $10,000 all in one place, or you might be divvying it up in different accounts for different things. It totally depends on your goal.
However, when you’re just starting out I would suggest choosing one high-interest savings account or one investment account to begin. Depending on the purpose of your savings, this might be a TFSA or an RRSP.
I would also recommend setting up your savings or investment account at a different bank than you do your day-to-day banking at. Why? Out of sight, out of mind is a powerful force, particularly when it comes to finance.
High-Interest Savings accounts
The reason a high-interest savings account is so important is that interest is passive income that will help you get to your savings goal faster. The higher the interest rate on your savings, the more money you’ll get without any effort. When your balance is small, the interest you earn might only be a few pennies.
The best high-interest savings account is EQ Bank. Their Savings Plus account consistently delivers one of the highest interest rates on the market. You can read more in our full EQ Bank Review here.
However, by the time you’re getting near your $10,000 savings goal, you could be earning as much as $100 per year in passive income.
INTEREST RATE EXAMPLES
$1,000 at 2.00% = $1.67 per month in interest income
$8,000 at 2.00% = $13.33 per month in interest income
If you really want to get to $10,000 as fast as possible, you’re better off investing in the stock market. This strategy carries a risk that savings accounts do not, but it is more likely to get you to your goal faster.
We recommend the following investing tools:
4. Calculate how much you need to save each month or week
One of the easiest ways to figure out how much you need to save on a regular basis is to have your savings coincide with payday. If you’re paid on a monthly basis, you’ll want to figure out how much to save each month. If you’re paid every two weeks, you’ll have 26 savings opportunities per year.
Let’s say you want to save $10,000 in 2 years, and you’re paid on the 15th and 30th of each month. You’ll divide $10,000 by 2 years, then 12 months per year, and then by 2 paydays per month.
SAVINGS CALCULATION EXAMPLE
$10,000 / 2 years / 12 months / 2 paycheques per month = $208 per payday
I like round numbers, so I’d personally round up to $210 or down to $200 at this point, but you can do what works best for you. I recommend rounding up!
To take this a step further, you might want to break it down once more to a weekly amount. Why? Because letting go of $100/week feels less painful than seeing $200 leave your bank account. I have found that saving on a weekly basis is infinitely easier than bi-weekly or monthly, even if I’m paid on a monthly schedule.
5. Set up an automatic transfer from your chequing account to your savings account
This might seem too obvious to state, but it’s a crucial step. Automate your transfer from your chequing account to your savings account or investment account!
Execution is always the hardest part. Most people know they should be saving and how to do so, but they still fail. Setting up your contributions to happen automatically forces your savings to go forward. You’ll save $10,000 so long as you don’t touch it!
BONUS TIPS on how to save $10,000
You’ll save $10,000 by following the steps I outlined above, but I have some extra tips in case you really want to ensure success.
BONUS TIP #1: focus on the first $1,000
One of the easiest ways to think about how to save $10,000 is to realize it’s simply a matter of saving $1,000 ten times! And the first $1,000 is the hardest. Once you know how to save $1,000, you just have to do it again and again until you hit your $10,000 goal.
BONUS TIP #2: find a side hustle to fund your savings
Another shortcut to meeting a savings goal is to create an income stream to take care of it. A side hustle is a part-time job or monetized hobby that you take on on top of your regular work to earn more money.
One of the best things you can do for a savings goal is come up with a side hustle specifically for it. For example, you might work one morning shift per week at a local cafe, and put all the money you earn towards your $10,000 savings goal.
And that’s how you save $10,000 and keep track of every penny of it!
This is a great post, would you be willing to share this template?
Sure! Let me make some edits and I’ll upload one for both Excel and Numbers =)
Thank you I appreciate it. By the way love your blog, I find your posts include great financial planning pieces (such as this one) coupled with personal funny posts!
Awesome post. Love the pretty spreadsheet!
Minor nitpicky note. Wouldn’t the monthly compounding rate be slightly less than yearly_apy / 12? For example, if my interest rate is 1.40%, the above would recommend diving that yearly APY to get a monthly rate of approx 0.1167%. Whereas, really, my monthly compounded rate should be:
monthly_rate ^ 12 = yearly_rate
monthly_rate ^ 12 = 1.014
monthly_rate = 1.00116 (0.1160%)
Therefore monthly interest is actually slightly less than yearly_apy / 12.
The difference also becomes greater as yearly APY increases. So, for instance, extrapolating monthly returns on the stock market might actually see a bigger “delta” (or difference) and the effects of this difference, as you know, becomes greater over time (a compounding effect!).
Alternatively, I could just be completely mistaken on how monthly compounding works on bank accounts, in which case, please feel free to ignore all of the above.
No, this math looks right but I doubtful the difference would be significant enough to seriously change the results — particularly for an amount as small as $10,000.
The math in the post is fine – after compounding, the interest received in a year is higher than the ‘advertised’ APY.
This is all kinds of helpful! Thank you for including the formula you used, it was a piece of cake to recreate this on my own!
Awesome happy to help =)
Dude, this is amazeballs. I’d done up to the beginning of Step 4 (figuring out how much to save each month in 2014) but didn’t think of creating a savings chart like this. Thanks for sharing! (And I’ll be sharing this post A LOT going forward – everyone needs to get their eyes on it.)
Yay!! Glad you like it (it really did take like 2 hours… taking so many screen shots argh)
PC Financial until end of Jan 2014 is offering 2.35% interest on chequing accounts or savings accounts. No need for RRSP or TFSA until at least 2014 Feb.
Rad!! That’s a great rate!
This is exactly what I do 🙂 I have it forecasted forward roughly (I do the APY/12, so it isn’t perfect, but it gets me close enough), and then I put in the actual number when I get through that month.
This is a great tutorial for people who aren’t spreadsheet weirdos! 🙂
Amazing! I actually have a nearly identical spreadsheet sitting in my google docs, exept it shows a little more detail like total interest and monthly contributions and interest. It’s so important to project forward in the future so you’ll know where you’ll end up!
Excellent, super detailed post. 🙂
I’d love an excel copy. Thank you for taking the time to share 🙂
Yes, I have a two year plan to off someone in 2015 in order to gain an inheritance. #jokes
This post suggests to me that a lot fewer people spend time playing with rates of return in excel than I thought! #addict
I appreciate the effort it took to get this post together. 🙂 $10k is my goal for August 30, 2013! Totally doable but my other savings/retirement goals need some love, haven’t been able to figure out yet how to hit my targets there so I have to increase my income.
Do you have an excel spreadsheet template? looks very cool!
Great spreadsheet. Did you ever post the template?
I love this idea to reach $10,000 in 2 Years, however for me, I realized the other day that as of March 2, 2016…. I will be exactly 27 months away from turn 30, as I will turn 30 on June 2, 2018!! So I’ve decided by my 30th birthday I will have $10,000 saved up! This means I will be saving a whopping $370.37 for 27 months to reach this goal! I know this will be very do able as when I used to save money back a year ago, I was throwing $350 into savings however long story short, I ended up digging into that savings after losing a job! So I know saving $370 or so a month won’t be hard and I will thank myself come 30! 🙂 I also decided that my next goal after $10,000 will be having $100,000 by my 40th birthday! How I love goals!! Mostly savings ones! <3