Financial security is crucial for an individual to meet sudden emergency expenditures or any future requirements. To have savings, one needs to take out a certain percentage or amount from their current income, which eventually helps in the long term. When planning for the future, savings becomes a top priority as the only way to save you from any unexpected loss in business or emergency expenditure can be only dealt with easily is when you have savings.
It is advised that an individual must save six months’ worth of expenses at least so that it can be used during any financial emergency. However, to calculate how much is a six month’s expense based on past records, a savings calculator is required.
Now that you know why you might need a savings calculator let’s find out what a savings calculator is and how it works.
What Is a Savings Calculator?
As the name interprets, a savings calculator is a calculator or a simulation to show how much you need to save from earnings monthly or annually to achieve all of your long-term and short-term goals. The result you get from the savings calculator depends on parameters like
- how much you are setting aside each month
- the expected rate of return on what you are investing and
- the duration of the investment.
The formula box of the savings calculator consists of all the parameters on which the result depends are given above. The result or the calculation is the amount you will need to save monthly/annually to meet all your financial goals. By using a savings interest calculator by calculating and ultimately living up to save what you need to, you can even retire early from work if you want.
How Does a Savings Calculator Work?
The savings calculator works to give you the amount you need to save each month/year to meet your expected financial goals. To calculate the amount you need, the savings calculator uses existing financial data from you, which includes:
- Existing Savings: There must be some amount that you have saved prior to using a savings calculator. In the ‘existing savings’ field, you will need to enter the amount you have saved to the present date. You must consider all forms of savings you have made till now, including Fixed Deposits and Investments.
- Amount You Want to Save: In this field, you will have to be careful and mention the value you need to secure your future. Depending on your future goals, medical or emergency expenditures, and the ever=changing currency rates, here you need to come up with a number that would serve all your needs in the future and reassure you. It is the most important field where your entire savings game will depend.
- Expected Time: You will need to enter the timeframe here in which you expect to have the amount you wanted to save in the first place. Putting a timeline to how soon you want to achieve your goals is necessary.
- Monthly/Yearly: There will be two options in this field for you to select from in this field to determine whether you want to invest in your savings monthly, which is more frequently than yearly or annually.
- Gross Annual Interest Rate [H3]:
In this field of the savings interest calculator, you will need to enter the rate, usually ranging from 1-20%, at which you receive the interest on your saving per year. The savings interest calculator takes everything into account before showing you the amount you need to save.
The accidental fatality or death rate stands at 5.7% as of 2019, and no one would want their family to suffer in case of an unfortunate situation. Taking precautionary measures is always better than cure, so you should start saving now to take care of any unfortunate incidents in the future. While you are at it, you should also consider some tax saving tips to cut down on the taxes incurred at your earnings and grow your wealth and savings overall.
Benefits of Using a Savings Calculator
The savings calculator gives you a decent idea of how much amount you need to save regularly right now to earn all your future dreams and goals. It works for both short-term and long-term goals taking into some of your current data.
- It is the perfect tool for managing all your expenses and utility bills to give you a perspective about what you would need to make your life just as you like and financially sound. By keeping a tab on all your expected expenditures and requirements, you will be able to plan a secure future for you and your family.
- While using the savings calculator, you also get to go through all the investments options to choose the best one available based on your long-term goals and the risk factors involved.