Say you want $80,000 for a house deposit in 4 years, you already hold $15,000, and your savings account pays 4.5 percent. The calculator first grows the $15,000 on its own for 48 months at 4.5 percent, which lifts it to about $17,952 by the target date. That leaves a gap of roughly $62,048 to fill with new contributions. It then solves for the level monthly amount that, with the same 4.5 percent compounding on each deposit, reaches that gap in 48 months, which works out to about $1,182 a month. Interest does some of the work, so you contribute less than the gap divided evenly, and a higher rate or a longer timeframe would lower the monthly figure further.
How it is calculated
The tool splits the goal into two parts. First it grows your existing savings using monthly compounding at the rate you enter, so the starting balance does some of the work by the target date. It subtracts that grown balance from the goal to find the gap that new contributions must cover. Then it uses the future value of an annuity formula in reverse to find the level monthly deposit that reaches the gap over the number of months, allowing for interest on each deposit along the way. If your current savings already grow past the goal, the required monthly amount is zero and the tool says so. Because the rate compounds monthly, raising the rate or extending the timeframe both reduce how much you need to set aside each month.
Frequently asked questions
Where should I save for a short-term goal?
For a goal within a few years, a high-interest savings account or term deposit protects your capital, since shares can fall right when you need the money. For a house deposit you may also use the First Home Super Saver scheme to save inside super at a lower tax rate.
How does compound interest help me reach my savings goal faster?
Compound interest means the interest you earn is added to your balance and then earns interest itself. The longer you save and the higher the rate, the more your money does the work for you. Even a modest 4 to 5 percent annual rate on a high-interest savings account reduces the monthly amount you need to contribute compared with earning nothing.
What is the First Home Super Saver scheme and how much can I save through it?
The First Home Super Saver (FHSS) scheme lets eligible first home buyers make voluntary contributions into their super fund and then withdraw those funds, plus associated earnings, to use as a deposit. From 2024-25 you can request a release of up to $50,000 in total eligible contributions. Because voluntary concessional contributions are taxed at just 15 percent inside super rather than at your marginal rate, many buyers save more after tax using FHSS than through a standard savings account.
Does the interest I earn on a savings account get taxed in Australia?
Yes. Interest earned on a savings account or term deposit is assessable income under the Australian Tax Office rules and is taxed at your marginal income tax rate. You must declare it in your tax return each year. If you are in a higher tax bracket, this reduces the effective after-tax return on your savings, which is worth factoring in when comparing a savings account with other options such as making extra super contributions.