If you are wondering ‘how much should I save each month’ then you are not alone. This is a question that crosses most people's minds especially as they start earning a consistent income.
Since building wealth is an important part of your long-term financial well-being, it is a great idea to have a monthly goal to put money aside.
Although it can be a challenge to increase your savings every month, doing so can have a big impact on your financial future. If you have a savings goal each month, then you are more likely to stick to a savings plan in most months.
Even if you don’t hit your savings goal every single month, it is a good idea to hold on to some of your monthly income for a rainy day.
Let’s take a closer look and find out how much money should you save a month.
Why should you prioritize saving each month?
Working towards a higher income and investing for the future are useful. However, your savings each month will propel you towards a better financial future.
Many of us put off saving because the future seems very far away. It can be tempting to live only for the present and spend every last dime in the process. Beyond enjoying our youth, many of us are struggling and living paycheck to paycheck.
In fact, 78% of American workers are living paycheck to paycheck! And nearly 40 percent of adults wouldn’t be able to cover a $400 emergency with cash, savings, or a credit card that they could quickly pay off.
That's why the money you put aside can build some flexibility into your life. Plus, it provides peace of mind as you journey through life.
You also have more freedom in your decisions because you are not strictly tied to a source of income. And you have the option to build your savings for the things that matter to you most.
How much should I save a month?
So, how much should you save a month? Well, the amount will vary widely. Here are a few ways each person's goals can differ.
How much should I save per month based on my financial goals?
Before you choose your savings goals, take a look at your life goals. Consider the logistics around large purchases such as a new car or a luxury vacation.
Plus, think about long-term timelines for your big savings goals such as buying your first home or retirement.
Thinking about savings goals such as a luxury vacation or worry-free retirement can be exciting. But it can be difficult to break these long-term goals down to monthly savings.
For example, if you plan to retire early then you may need to save 50% of your income each month. However, if you want to retire in your 70s, then you will likely not need to have such an aggressive savings goal.
The savings goal you set for each month is truly a personal decision. Make sure to factor in your own life plans when you set up your savings plan.
With that, a good place to start your savings goal is 20% of take-home pay each month. It's a general rule of thumb that most experts recommend.
That is based on the 50-30-20 budgeting method which suggests that you spend 50% of your income on essentials, save 20%, and leave 30% of your income for discretionary purchases.
So if you bring home $1,000 after taxes each month, then you would try to set aside $200 each month. You might divide that $200 into several different vehicles.
For example, you might direct the money you’ve earmarked for retirement into a 401(k) or Roth IRA. Or place some of the money into a high-interest savings account until you are ready to spend it on your upcoming vacation.
How much should I save each month based on my monthly expenses?
An emergency fund is one of the most important things you should consider when you ask yourself "How much should I save per month?" In fact, it could be the best place to start your savings.
Having emergency savings prepares you for the inevitable surprises that life throws your way. A good starting point is 3 to 6 months of savings, then 12 months if it makes sense for your situation.
When you are faced with a medical emergency or unexpected car repair, you’ll be able to fund those costs without sinking into debt. If you're a homeowner, your emergency fund can help cover home repairs as well.
Set a goal to have at least three to six months' worth of your basic living expenses in emergency savings. The exact number would be your emergency fund ratio.
If the amount seems high, note that this refers to your essential monthly expenses. It's what you need at the bare minimum to pay for groceries, rent, utilities, and transportation.
Having an emergency fund gives you peace of mind and you can focus on the actual emergency at hand instead of how to pay for it.
How much should I save per month based on my life situation?
Of course, it might not be possible to put aside 20% of your income in your current situation. And that is completely okay! Take a closer look at your finances and determine how much you can manage to save each month.
Saving small amounts of money is much better than saving no money at all. Plus, every little bit adds up. Even if you were only able to save $20 each week, that still leads to $1,040 in savings at the end of the year!
As you move through life, reassess your plans along the way. For example, if you are able to negotiate for a raise, then you might be able to increase your savings rate.
Or if you have a month with many unexpected expenses, don’t be discouraged if you don’t hit your goals.
Life can get messy, you should expect to adjust your savings goals to adapt to the situations that life throws your way.
How much money should I have saved by age?
Putting money aside for the future is always a good thing. However, our circumstances may not allow us to do so consistently or even hold on to our money.
Still, it doesn't hurt to know where you stand when it comes to money in the bank or net worth. So, here are some stats around savings by age.
How much money should I have saved by age 30?
According to the Federal Reserve’s data, people under the age of 35 have an average savings of $34,780. So, if you're on the younger side of this bracket, you're doing well if you have that much set-aside.
And if you're over 35 but don't have that amount in the bank, you can always start putting money aside today.
How much money should I have saved by age 40?
Between the age of 35 and 44, the average savings according to the Federal Reserve is $170,740. This is also the time when you should be getting serious about investing for retirement.
And for that, Fidelity recommends having at least three times your annual salary saved at 40.
How much money should I have saved by age 50?
According to the study, Americans between the age of 45 to 54 own an average of $507,660 in financial assets. At this point, your retirement fund should have at least six times your annual salary per Fidelity's recommendation.
These figures are not hard and fast rules by any means. But you can use them as guidelines to start your savings plan or assess your progress.
Don't beat yourself up if you're not there yet. What matters is you start putting money aside when you can.
How much should I save each month calculators
Not many people like the idea of doing math. We've got our list of favorite calculators we like to call, "how much should I save each month calculators."
Whether you want to save for retirement, an emergency fund, or life milestones like a wedding, it's good to have a specific number to save each month.
These "how much should I save each month calculators" will help you figure out the amount of money you should be putting aside to reach your goals.
Investor.gov Savings Goal Calculator
Want to know how much should you save a month to achieve your goal? Simply input the specific number you're aiming for, the number of years you plan to save, and this Savings Goal Calculator will compute the amount you need to deposit each month.
Bankrate Simple Calculator
Use Bankrate's Simple Savings Calculator to see how much your savings grow over time. Or put a goal amount such as a down payment for a house and calculate how long it will take you to get there.
The Calculator Site
Estimate how much should you save a month to reach a financial goal with these Savings Goal Calculators. Use them to work out your strategy to put money aside.
Emergency fund calculators
If you are focused on putting money aside for potential emergencies, below is a list of our favorite emergency fund calculators. Simply input your expenses and it will calculate how much you need to put aside. Here are some of our favorites:
- PNC Bank emergency fund calculator
- Ally emergency fund calculator
- Fifth Third Bank emergency fund calculator
How to save more money each month
Once you calculate how much money you should save each month and set your savings goals, you might need to make some changes to your savings habits to meet those goals.
Let’s take a closer look at some of the ways that you can save more money each month!
1. Evaluate your priorities
As you start to save more, evaluate your priorities. You should not slash all the things out of your budget that makes your life enjoyable just to meet your goals. Instead, get creative with the spending that doesn’t make you happy.
For example, you might not be willing to eliminate weekly dinners out with friends. However, you might be able to cancel some subscriptions that you rarely use anyway.
2. Try to be frugal
Frugality can sometimes get a bad rap because people confuse being frugal with being cheap.
Cheap means getting the lowest price possible, but frugal means aligning your spending with your values. Learning to be frugal can help you increase your savings without sacrificing the quality of your life.
Here are a few ways to build frugality into your spending habits:
Seek out discounts
You can find a discount for almost anything. Whether you seek out a better rate on your car insurance or compare prices on everyday purchases, you can build more savings into your budget without too much effort.
Be sure to ask for discounts as well. You never know what a store or service provider might have to offer!
Find coupons
Coupons can help you spend less on items without sacrificing quality. Check out our favorite coupon websites here.
Try the 24-hour rule
If you find an item you like, then consider waiting 24 hours before making the purchase. You might find that you don’t really want the item after 24 hours. This practice can help you to become more intentional about your spending.
Meal plan
Meal planning can cut out last-minute fast food because you'll shop for and plan your meals in advance. Try our 30-day meal planning challenge to find out how much less you can spend to put more money in the bank.
These are just a few ways to be more frugal. Make sure to get creative in your own life!
3. Earn more
If you are unable to cut any spending out of your budget, then the best option is to earn more. Luckily, your income potential is not something with a cap.
The first place to start is by asking for a raise at your current job. You might be able to negotiate a higher pay rate for the same amount of effort.
If a raise is not in the cards, then consider a side hustle. With some creativity and hard work, you can build a side hustle to increase your income and supercharge putting more cash in your bank.
If you are interested in building a side hustle, then check out our side hustle course which will teach you how to get started.
4. Try a savings challenge
A savings challenge is a great way to motivate yourself to save more. As you go through the challenge, you might find that you are able to put more aside than you realized.
You might want to start small with our 90-day savings challenge. The goal is to put aside every $5 bill that you receive over 90 days.
With our challenge, you’ll have an accountability buddy that can help motivate you to stay on track. It can be surprising to realize how much you are able to put aside through this simple tactic.
You can save money each month!
Saving for your future is an important step to building a healthy financial picture. Although it can be a challenge to start at first, it will get easier with practice.
As you ask yourself, "How much should I save each month?", take a look at your financial picture and decide how much you want to put aside. Perhaps you want to save $5,000 in 3 months or $10,000 in a year.
Consider how much you are able to based on your current income and spending. Then, find a balance that works for your situation.
It is possible to make putting money aside each month a reality. Although it might not always be easy, your future self will thank you!
Ready to take things a step further? Learn more about saving money and building wealth on the Clever Girl Knows podcast and YouTube channel!