Monthly savings for £20,000 in 3 years
Two scenarios — zero interest vs 5% AER.
Short answer
£556/month cash, or £516/month in a 5% AER account.
Breakdown
- Total months: 36
- Cash-only plan: £556 × 36 = £20,016
- 5% AER plan: £516/month (compound growth does some of the work)
- Interest earned over 3 years at 5%: ~£1,424
Other rates on the same target
- 3% AER (typical easy-access): ~£532/month
- 4% AER (competitive easy-access): ~£524/month
- 7% (long-run equity tracker): ~£501/month — but equities are not appropriate for a horizon under five years
Weekly & daily equivalents
- Per week (cash): ~£128
- Per day (cash): ~£18
- Per week (5% AER): ~£119
If you can only save less
Saving £389/month instead — 70% of the target rate — still reaches roughly £14,011 in 3 years (cash) or £14,000 at 5% AER. A smaller amount you sustain every month almost always outperforms a larger pledge that collapses in month four.
Where to keep this money
For a 3-year horizon, a blend of cash ISAs and short-dated gilts/bond funds is sensible. Equities are higher risk on a sub-five-year window but a small allocation can lift the average return. For balances above the £85,000 FSCS limit per institution, spread across providers.
Inflation-adjusted target
At 3% long-run inflation, £20,000 in 3 years' time is worth roughly £18,303 in today's money. To preserve real purchasing power you'd actually need to hit £21,855 in 3 years — about £52/month extra on the cash plan. A 5% AER account broadly keeps pace with inflation; a 3% account does not.