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How Much Should You Save Each Month?

The first step in achieving a goal is setting one.

April 19, 2022 | Madison Foster

Closeup of man in suit sitting behind desk holding glowing lightbulb and filling piggy bank with coins

We all know how important it is to save, but for many it’s easier said than done. So how much should you really be saving each month to hit your financial goals? There’s no magic number, but the short answer is: It depends. Let’s dive in and I’ll explain.

A widely accepted and encouraged principle of saving is the 50/30/20 rule. This rule, popularized by Sen. Elizabeth Warren, says that you should divide up your after-tax income as follows: 50% for essentials like food and shelter; 30% for wants like that fancy lawnmower or pair of shoes you’ve been eyeing; and 20% for savings.

The important thing to note here is that this rule is merely a guideline. Your percentage breakdown may need to be adjusted based on your personal situation.

50/30/20 Pie Chart

For instance, if your net income is higher than average and you can already live well within your means, it would be a great idea to put a significantly higher amount towards some sort of savings. On the other hand, if you are currently living paycheck-to-paycheck, 20% may not be possible for you right now.

The key takeaway is that doing something is always better than doing nothing, and that applies to saving as well. Putting 20% of your income back is a great goal to work towards, but it’s not something that every person can do right away.

An added layer of monthly savings is automation. When money automatically goes towards your bills or savings before hitting your main account, you likely won't miss it as much. Learn how to utilize online bill pay and automatic transfers to save you more money towards your goals.

Another factor to consider are your long- and short-term goals. If you are setting aside a specific amount for a beach vacation, you may need to save extra for a while so that you have the funds available when you need them. If you plan to work until you physically can’t anymore and retiring early isn’t a goal, you may have a little more wiggle room in your fun money-to-savings ratio, particularly if you established a retirement account at a young age and contribute to it regularly.

A final tip that can help you reach your savings goals is to increase the amount you’re saving each time you earn a pay raise. Think about it: You lived on what you were making prior to the wage increase, so why not put that extra dough into a 401(k) or high yield savings account and have it work for you in the background? Adding 1-2% to your savings annually could get you to that 20% goal faster than you think.

Making an Emergency Fund

Financial experts believe you should save three to six months of your current living expenses as an emergency fund in case you have a sudden financial upheaval. Think of something like losing a job, a large medical expense, or a major repair for your home or vehicle.

Following the ideal scenario of half your income going towards the basics, your expenses are $25,000 a year, which comes to $6,250 to $12,500 for a total emergency fund to last three to six months. At $833 a month, saving for a robust emergency fund would take 7.5 to 15 months. Having a savings account that draws interest or a certificate of deposit (CD) would help you reach that goal faster.

More Tips on How to Manage Savings Goals

Save as much as you can within reason. We understand that life happens. And your goals and situation are unique. If you want a stronger financial future, save more if you have the flexibility.

Use handy online calculators based on your situation. We have a few you can use, such as a calculator for saving towards a goal, comparing savings rates, and the impact of saving more money. Calculators offer an excellent starting point for hard numbers as you work toward a specific purpose.

Pay off debts as soon as you can. That will free up more money for savings and help you reach your goals faster. Again, we're happy to help you make a plan.

Whatever you decide to save, and however you decide to do it, keep going! It just may change your financial future.

OMB and its affiliates do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decision.

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