How to save for a goal a little each day

A goal like a holiday, a new bike or a deposit feels far away as a single number. Broken down into a monthly and then a daily amount, it becomes something you can fit into an ordinary week.

Step 1: Put a price and a date on it

"Save for a holiday" is hard to act on. "$1,200 by the end of June" isn't. Find out roughly what the thing costs and pick the month you want it by. If you're not sure of the price, round up; ending with spare money is a better problem than coming up short.

Step 2: Divide it down

Say it's $1,200 and you have eight months:

The 30.4375 is the average length of a month (365.25 days ÷ 12), the same figure used in How to work out your daily budget.

Now compare it with your daily allowance. If you have $40 a day to spend, setting aside $4.93 of it leaves about $35.07. That's the real question to ask yourself: could you live on $35 a day for eight months? If yes, the plan works. If not, move the date back or lower the target. Both are better than a plan you abandon in March.

Step 3: Choose how the money gets set aside

Off the top, every month

Treat the saving as a bill. It comes off before your allowance is worked out, so you never see it as spending money. This is the most reliable way, because nothing depends on how the month goes.

Sweep up what's left

Spend from your normal allowance and, at the end of each week or month, move whatever you didn't spend into savings. This feels good in careful weeks, but it saves nothing in the weeks that go over, so it's better as an extra on top of a fixed amount than as the whole plan.

Both

A fixed amount off the top keeps the goal on track, and sweeping up the leftovers gets you there sooner. The sweep is the more satisfying part, but the fixed amount is the part you can count on.

Step 4: Keep the goal money separate

Money set aside for a goal is easy to borrow from "just this once". Keeping it somewhere you don't spend from, a separate savings account or at least a separate figure you track, makes borrowing a deliberate choice. If you do borrow, write down how much, and pay it back the same way you'd make up an overspend: a little each day.

When things change

Plans drift. The price goes up, a car repair eats a month's saving, or you get there early. A few rules of thumb:

• If you fall behind, work out the new monthly amount from what's left and the months remaining, rather than trying to catch up in one go. $600 left with four months to go is $150 a month, the same as before; $750 left with three months to go is $250, and that's the moment to decide whether to move the date instead.
• If you get ahead, keep the fixed amount going anyway. Finishing early is a nice surprise; stopping early tends to mean starting again later.
• When you reach the goal, spend it on the thing. That's what it was for.

Doing it in Daily Allowance

The Kitty Bank is the app's savings, kept apart from your Daily Balance. It has four actions, on the + button on the Kitty Bank screen:

• Save moves an amount from your Daily Balance into the Kitty Bank.
• Add puts money into the Kitty Bank without touching your Daily Balance, for money that never went through your daily budget, such as a gift or a bonus.
• Withdraw moves money from the Kitty Bank back to your Daily Balance.
• Spend records a purchase paid from your savings, without moving it back to your Daily Balance first.

For the off-the-top method, add your monthly saving as a recurring expense, like a bill, so your Daily Allowance already leaves it out. Then, once a month, use Add in the Kitty Bank to record the same amount there. For the sweep, use Transfer to Kitty Bank on the home screen. It appears when your Daily Balance is above zero and moves the whole balance into savings in one go.

To track progress, set a Savings Goal in Settings. It's entered as a percentage of your annual allowance, meaning your Daily Allowance multiplied by 365. With a $40 allowance, that's $14,600 a year, so a $1,200 goal is about 8.2%:

$1,200 ÷ ($40 × 365) × 100 = 8.2%

Once it's set, the Kitty Bank screen shows a progress bar with your balance against the goal amount, and the kibble picture on that screen changes in seven stages as you get closer. The Kitty Bank list shows this month's entries by default, and See all Entries shows your whole savings history.

If the goal is a big purchase you'd rather pay off after buying, Premium's Spread over months turns it into monthly amounts instead. What to do on a day you overspend covers when that makes sense.