Step-up savings: raise your deposit every year
Short answer: Step-up saving starts at one amount and raises it by a fixed percentage at the start of each year, often in line with pay rises.
| Put in | Interest | Final balance | |
|---|---|---|---|
| Same deposit every year | $18,000 | $8,729 | $26,729 |
| Raised 5% a year | $25,894 | $10,856 | $36,751 |
Both lines use the same rate and the same number of years.
An illustration under the assumptions listed below, not a forecast and not personal advice.
What problem does it address?
A flat deposit loses weight as prices and pay rise. Stepping it up keeps the habit proportionate without a big jump on day one.
How does it work?
- Year one uses the starting deposit.
- Each later year the deposit is the previous year's multiplied by one plus the step-up.
- The balance is built the same way as any monthly saving, with the larger later deposits.
Key terms
- Step-up rate. The yearly percentage increase in the deposit.
- Total put in. Rises faster than with a flat deposit because later deposits are larger.
What are the benefits?
- Grows with income
- Starts small
- Easy to reason about
What are the risks and limits?
- Needs the extra money to actually be available each year
- Result still depends on an assumed rate
- A pause or a missed step changes the outcome
What does the simulator assume?
- The step-up applies each January of the plan year
- Deposits at the end of each month
- One steady rate
Different assumptions give different results. A figure here is a projection under these assumptions, not a prediction.
Where to read more
- SEC Office of Investor Education (Investor.gov): Plain-language guides to compound interest, saving and investing basics, and a compound interest calculator.
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Frequently asked questions
Is raising the deposit worth it?
The table shows what it does: how much more is put in and how much more the balance ends up at. Whether it is affordable is a question about your budget, which the Goal check covers.
How big should the step-up be?
That is your call. Try a few values above and compare the totals.
Put your income, spending and goals into the Goal check to see how a plan sits against what you have left each month. Free, no bank sync.
Open the Goal checkThis page is for education. It shows what a strategy does under stated assumptions and is not personal investment advice.