Yes, saving £1,000 a month is great! It amounts to £12,000 a year and if this amount is invested properly, it will grow into a very large portfolio over time.
Let’s dive in further and see what it means to save such a large amount of money in the UK.
How Quickly Will £1,000 a Month Grow?
When invested properly, the monthly savings of £1000 can grow in to a very big portfolio in relatively short period of time.
Use the calculator below to see how fast this pot of money can grow by testing out different time periods and rates of return.
Savings Growth Calculator UK
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There are 4 inputs to this saving £1000 a month calculator for the UK:
- Starting Investment: Enter the current value of your portfolio. If you’re just starting out, then you can default it to £0.
- Monthly Savings: The amount you will commit to your portfolio each month.
- Annual Rate of Return: A safe value to use is somewhere between 6% to 8%. If you are extremely conservative, then you can use 4% to 5%. If you are aggressive, you can try between 8-10%.
- Number of Years: How many years you can contribute the £1,000 per month.
The calculator shows two charts in the result. The first chart shows your portfolio growth over time when you save £1000 (or another amount) a month.
The second shows the same thing, but splits out the components in to your cumulative invested capital (dark blue) and market returns (orange). If you invest for long enough (over 30 years), the market returns will far exceed the total cash you have contributed.
You can take these results and see how your current savings compare against others in the UK.
How Much Should I Save Each Month?
Before we dive further in to the discussion of is saving 1,000 a month good in the UK, it’s worth stepping back for a second and asking the most basic question: How much should I save each month?
Let’s go through the key questions that will help you reach that answer.
What’s your end-goal?
The amount you should save every month largely depends on these goals. For example, if you’re planning to buy a house with a mortgage , the required amount may be different compared to saving for retirement.
What’s your monthly income?
Your income also plays a crucial role in determining the appropriateness of saving £1,000 per month.
An ideal monthly savings target would be 20% of your income, so someone earning £60k a year would be a good candidate for saving £1k a month. However depending on your circumstances, this could prove to be a tough target.
Saving 10% of your monthly income is also a reasonable target. In this case, it would mean you’d have to be earning well above £100k a year to save £1k per month.
For someone on a salary of £50k a year or less, it’s probably a very difficult target to hit unless you happen to live in a place with a low cost of living or you are bunking up with family, roommates, or friends!
What are your monthly expenses?
Last, but not least, expenses play a significant role in determining how much to save each month. Expenses include not only the obvious like rent and food, but also things like mandatory debt payments on credit cards and student loans.
Higher expenses mean you have less money to save. Therefore, it’s important to assess your monthly expenses and work on reducing unnecessary spending.
Setting your monthly savings target
Now bring it all together, it’s important to set a target savings rate that meets your needs and requirements in both the short-term and in the long-term.
Try creating a monthly budget to see what level you can reach. You could try using a budgeting framework like the 10-20 rule for guidance.
If you find that it will be too difficult to hit the £1k month target, you could instead aim to save £500 a month.
On the other hand, if you find that your budget has plenty of room, you could try increasing your savings target to £2,000 per month!
How do I save £1,000 per month?
Once you’ve set your mind on saving that £1k per month, it’s time to get cracking.
It of course goes without saying that you’ll need to boost your savings. We’ve covered that concept thoroughly here at PFF, so I recommend you go through the articles listed here:
- Become Frugal: Best Frugal Money Saving Tips
- Save Money on Groceries: 20 Ways to Save Money on Food Shopping
- Use Cash Back Apps: The 10+ Best Cashback Apps Used Right Now
- Look for profession-based discounts such as that for teachers: Best Discounts for Teachers and School Staff
- Generate Some Extra Income through Side-Hustles: How to Make an Extra £100 a Week Online in the UK
If you find it difficult to stick to a savings strategy, you may want to check out apps that help automate this for you. There are plenty of AI-based savings apps like Plum, Moneyhub, and Chip that make your life a whole lot easier!
If you need help with budgeting, you may find it helpful to look at apps like Money Dashboard and YNAB.
Why should I save £1000 per month?
Costs are rising all over the world and inflation is rampant, which is why it’s a good idea to have a savings strategy so you can overcome spending challenges.
Let’s go through the key themes for why saving money is important.
Having basic financial security is vital as it can make a world of a difference in the event something unexpected happens. Life has a habit of being fairly random in nature, meaning if you need medical care or to take time off work suddenly, it’s worth having a savings pot – such as an emergency fund – to fall back on.
Above all, it’s comforting to know that you have a savings account and money spare to handle much of what life throws at you. Sadly, many of modern life’s challenges need money before you can even start thinking about solving them!
Short-term goals and needs
We earlier discussed other goals such as saving for your child starting university, or saving up for a house. All of these are goals that are worth saving up money for.
You should also start saving for taking time away from work, too. What if you want to take your family on vacation? Having a few thousand pounds in a savings account can ensure you’ll get away somewhere without having to keep counting the pennies.
Financial freedom in the long run
I’m such a big believer in financial freedom that I decided to launch a site about it! Being financially free is uplifting and allows you to refocus life from simply existing to actually living!
What’s the best way to invest £1000 per month?
The best way to build up a huge portfolio with a £1,000 a month in savings is arguably through investing. However before we get there, it’s first important to look at the full picture.
- Eliminate debt: As boring and repetitive as it sounds, it makes sense to first eliminate your debt – especially high interest rate debt such as credit card debt or other consumer loans like car loans or those buy-now-pay-later type debt.
- Build Up Your Emergency Fund: Again, another piece of unsexy advice, but it’s important to build up your emergency fund with cash savings that has at least 3 months, but preferably 6 months of expenses. You can invest your emergency fund in a high interest savings account or perhaps even put it in a money market fund.
- Invest it: Finally we get to the most fun piece. It’s important to invest your money in a way that aligns with your needs and risk tolerances. Depending on your needs you may choose to go with balanced funds or perhaps go all out with 100% equity funds. It’s important to manage your portfolio prudently, but being overly conservative is not recommended as you will end up sacrificing long-term returns.
expert financial advisor with a low-cost?
Capital at Risk.
If you need help with this, a good way to start would be to educate yourself and to meet with a financial advisor who has fiduciary duty towards you. They will help you decide how to structure your portfolio. Some people have a preference for capital growth whereas others may want dividend income.
We’ve reviewed lots of financial advisory services here on our blog and if you’re in the market for one, I recommend perusing through our review articles. You can read more about InvestEngine, Moneyfarm, Nutmeg, Hargreaves Lansdown, and more!
How long will it take me to save £1 million when saving £1k a month?
If you invest £1,000 per month in the financial markets, your portfolio can grow to £1 million in just over 26 years if you earn an average 8% per year. If your portfolio generates 6% per year, you can expect to get there in a slightly longer 31 years.
It’s not as bad as it might seem. Let’s say you’re in your early 30s when you start saving £1k per month, you will likely be a millionaire by the time you’re 60. It’s a great position to be in!
If you’d like to try out other savings options to see if you can get there faster, do check out the millionaire calculator to see how quickly you can grow your savings!
Before You Go…
Saving £1,000 a month is a great target. As we’ve seen individuals and families can secure their financial future by investing in stocks, bonds, or real estate to boost their wealth and grow their passive income.
Compound interest can turn small investments into significant wealth over time, making it an essential tool for those looking to grow their net worth.
Our whole blog is dedicated to help you get on the path of financial freedom. Feel free to browse around and read through the articles. There are plenty of investment books and podcasts that you can use as a learning resource along the way to help you reach your goal faster. We also have numerous calculators to help plan out your journey to being financially free!
by Jon Craig
I am the creator of Project Financially Free and I started this journey to both educate myself and share my insights on personal finance. I’m passionate about financial literacy and I invite you to join me on this transformative path. See more.