How to Save Money for Big Purchases
To calculate monthly savings for a big purchase, divide your total goal amount by the number of months until your target date. For example, saving $6,000 in 9 months requires $667 per month. Always add 10-15% extra for inflation and unexpected costs.
The good news? With the right plan, saving for major purchases doesn't have to stress you out. Smart saving strategies help you reach your goals without going into debt or draining your emergency fund.
Set S.M.A.R.T. goals for your big purchase
Before you start saving, get specific about what you want. S.M.A.R.T. goals give you a clear target and make success more likely.
- Specific: Name exactly what you're buying and how much it costs.
- Measurable: Set a dollar amount. Research shows people with written goals and specific deadlines achieve them significantly more often.⁵
- Achievable: Pick a realistic timeline based on your income and expenses.
- Relevant: Make sure this purchase fits your priorities and values.
- Time-bound: Set a firm deadline.
Here's what a S.M.A.R.T. savings goal looks like: "I will save $4,000 for a 10-day vacation to Europe by August 31, 2027, by automatically moving $400 from each monthly paycheck to a dedicated vacation savings account."
Understanding your budget: The 50/30/20 rule
The 50/30/20 rule splits your after-tax income into one of three money buckets. This simple framework helps you balance today's needs with tomorrow's goals.
- 50% for needs: Household repairs, utility bills, minimum debt payments, groceries and transportation.
- 30% for wants: Entertainment, dining out, subscriptions, hobbies.
- 20% for savings: Retirement accounts, emergency fund, and your big purchase goals.
The 50/30/20 rule scales with your income. As you earn more, your savings potential grows too.
If you live in a high-cost area where inflation has made basics more expensive, try the 70/20/10 rule instead. Put 70% toward needs, 20% toward wants, and 10% toward savings.
What's a sinking fund?
A sinking fund is a separate savings account for one specific expense. You set aside money regularly until you have enough to pay for the item without borrowing. Think of it as paying yourself instead of a lender. Most people use sinking funds for cars, vacations, home renovations, or down payments. Basically, anything that costs more than a few hundred dollars.
Create a sinking fund for your purchase
A sinking fund is money you set aside specifically for a major expense. It's the smartest way to buy something big without borrowing.
Pay yourself first
Set up your sinking fund to work automatically. Pay yourself first means your savings come before your discretionary spending.
Many financial experts recommend saving 10% to 20% of your income.⁶ The exact amount depends on your goals, timeline and monthly expenses.
Set up an automatic transfer so money moves to your sinking fund before it hits your checking account. When you never see the money, you won't miss it.
Calculate your monthly target
Use a savings calculator to figure out exactly how much you need to save each month.
How to calculate your monthly savings target:
- Find the total cost. Research the exact price, including tax, shipping and any extras (warranties, upgrades).
- Add for inflation. If you're saving for more than one year, add 10-15% to account for price increases.
- Set your timeline. Count the months from now until your deadline.
- Divide the total by the number of months. This gives you your monthly savings target.
Example: $6,000 purchase ÷ 9 months = $667 per month
If you need $6,000 for a used car by next December and it's March now, you have nine months to save. According to the Bureau of Labor Statistics, the inflation rate from January 2025 to January 2026 was 2.4%¹ Factor in potential price increases for long-term goals.
Open a high-yield savings account
Put your sinking fund in a separate high-yield savings account. This keeps your goal money away from everyday spending and helps it grow faster.
High-yield savings accounts currently offer rates up to 5.00% APY.² That's more than twelve times the national average for regular savings accounts.
Interest compounds daily in most accounts and gets added monthly. The more frequently your interest compounds, the greater your return.
Track your progress
Check your balance monthly. Celebrate small wins along the way.
If you have an off month and can't save your full amount, that's okay. Adjust your plan and keep going. One missed month doesn't mean you should give up.
Four ways to pay for major purchases
You have four main options when it's time to make a big purchase. Each works better in different situations.
1. Save first (recommended)
Save the full amount before you buy. This sinking fund approach keeps you debt-free and gives you negotiating power. You might even find deals or discounts while you're saving.
2. Use existing savings
Tap money you've already saved. Only do this if it won't drain your emergency fund or hurt other financial goals.
3. Borrow or finance
Take out a personal loan or use a credit card. This gets you the item now but costs more due to interest. Consider this option for true necessities or time-sensitive opportunities. Learn more about understanding debt and credit options.
4. Combination approach
Mix your methods. Put down a large chunk from savings and finance the rest. This reduces your debt load while getting you what you need sooner.
This option works well if you're saving for a home down payment. A large down payment reduces your loan amount and the interest you pay over time.
| Payment method | Cost | Speed | Debt risk | Best for |
|---|---|---|---|---|
| Save first | Lowest (no interest) | Slowest | None | Most major purchases |
| Use existing savings | None | Immediate | None if the emergency fund stays intact | Time-sensitive needs |
| Borrow/finance | High (interest charges) | Immediate | High | True emergencies, time-sensitive opportunities |
| Combination | Medium (partial interest) | Medium | Medium | Balancing speed and debt |
Factor in inflation for long-term saving goals
Long-term savers need to think about inflation. Rising prices erode the buying power of your money over time.
Cash savings can lose buying power when prices rise, especially if the interest earned doesn't keep up with inflation.
Add 10-15% to your savings goal if you're planning a purchase more than two years away. What costs $5,000 today might cost $5,500 in three years.
The Federal Reserve paused rate cuts in January 2026 and maintained rates at 3.5%-3.75%.4 This provides a stable environment for high-yield savings accounts to continue offering attractive rates.
Tools and tips to help you save
Managing your money gets easier with the right tools. Associated Bank’s Digital Money Monitor feature gives you a clear picture of your spending and savings.
Money Monitor shows where your money goes each month. Use these insights to find extra cash for your sinking fund.
Set up alerts to catch duplicate charges and track changes in subscription fees. These alerts help you spot money leaks that could otherwise go toward your big purchase.
The budgeting tool helps you set, track, and achieve financial goals. Whether you're curious about spending patterns or want to stick to your plan, Money Monitor provides an easy solution.
Money-saving strategies you can use now
Cut back on wants while you're building your fund. Skip the coffee shop, cancel unused subscriptions or eat out less often.
Research shows people spend up to 83% more when using credit cards than when using cash.⁴ Try the cash-only challenge for discretionary purchases.
Look for free or cheap alternatives to expensive entertainment. Many cities offer free concerts, museum days, and outdoor activities.
Set up low-balance alerts so you never accidentally spend from your sinking fund. Catch duplicate charges and subscription increases that you can redirect to your savings goal.
Start saving for your dreams today
Saving for major purchases takes patience and planning, but the payoff is worth it. You avoid debt, reduce stress and get exactly what you want without financial strain.
Start with a clear goal, pick your savings strategy and set up automation. Before you know it, you'll have the money to make your dreams come true.
Ready to open a savings account for your next big purchase? Associated Bank offers competitive rates and tools to help you reach your goals faster.
Key takeaways
- A sinking fund lets you save for major purchases without going into debt or draining your emergency fund.
- Use the 50/30/20 budgeting rule to figure out how much you can save each month.
- High-yield savings accounts earn 5.00% APY or more, which helps your money grow faster.
- Automatic transfers mean you save before you spend, making it easier to stick to your goal.
- The combination approach works well if you need your purchase sooner—save a large down payment and finance the rest.
How to Save Money for Big Purchases Frequently Asked Questions
How long does it take to save for a big purchase?
It depends on your goal amount, monthly savings, and timeline. If you save $500 a month for a $6,000 vacation, you'll reach your goal in 12 months. Start by setting a specific deadline, then work backward to figure out your monthly target.
What's the difference between a sinking fund and an emergency fund?
A sinking fund is for planned, big purchases like a car or a vacation. An emergency fund covers unexpected costs like medical bills or job loss. Keep these separate so you don't dip into emergency money for planned expenses.
Should I use a savings account or an investment account for my sinking fund?
Use a high-yield savings account for purchases you need within 1-5 years. Your money stays safe and available, and you earn interest. For goals more than five years away, talk to a financial advisor about other options, such as a CD.
What if I can't save the full amount by my deadline?
Adjust your plan. You can extend your deadline, use the combination approach (save part, finance part), or lower your goal. Missing one month doesn't mean you should give up. Instead, focus on getting back on track next month.
Can I use my sinking fund money in an emergency?
Only as a last resort. Your real emergency fund should cover unexpected costs first. If you use your sinking fund for an emergency, restart your savings plan afterward and adjust your timeline if needed.
How much should I have in my emergency fund before I start a sinking fund?
Have 3-6 months of living expenses in your emergency fund before you start saving for big purchases.
Do I need to open a new bank account for each savings goal?
You don't have to, but many people find it helps them stay on track. You could use the same account and track each goal separately, or open separate accounts if your bank allows it. Money Monitor tools can help you organize multiple goals within a single account.
What if interest rates drop while I'm saving?
Consider CDs if you want a guaranteed interest rate for a fixed time period. Your principal is protected by FDIC insurance up to $250,000. High-yield savings or money market accounts are more flexible if you need to access your money.
Sources
1. https://www.bls.gov/opub/ted/2026/consumer-prices-up-2-4-percent-over-the-year-ended-january-2026.htm
2. https://fortune.com/article/best-savings-account-rates-4-20-2026/
3. https://www.cnbc.com/2026/01/28/fed-rate-decision-january-2026.html
4. https://www.valuepenguin.com/credit-cards/credit-card-spending-studies
5. https://snow.edu/blog/Why_you_should_write_down_your_goals.html
6. https://www.cnbc.com/select/how-much-money-you-should-save-every-paycheck/#how-much-you-should-save-every-paycheck
For Informational/Educational Purposes Only: The opinions expressed may differ from other employees and departments of Associated Bank N.A., or any bank or affiliate. Opinions and strategies described may not be appropriate for everyone and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results. (1513)