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How Much Should I Save Each Month?

Sarah Li Cain4-minute read
March 23, 2022

Building financial security for you and your family means setting aside money for a rainy day, but that’s not to say saving money is an easy task. Between your expenses, debt repayment and other types of financial obligations, your paycheck may be feeling pretty stretched.


Regardless, you really shouldn’t put off saving because your life goals may be out of reach without it. Let’s explore the specific reasons you’ll want to save money and help you answer the question: “How much should I save each month?”

Why Do You Need To Save?

As hinted earlier, saving money has to do with helping you reach your life goals. It can feel amazing to know you’re a good steward of your money, but that’s not the ultimate goal. The ultimate goal is for you to be able to use your savings to help you achieve milestones or when there’s an unexpected circumstance where you need cash right away.

For example, let’s say you and your spouse are finally ready to settle down and start a family of your own. Your tiny condo isn’t going to be enough for more than two people plus your current pets, so you decide to start looking for a house.

You guessed it – you need savings to be able to do that. As in, you’ll need to have money set aside for closing costs, a down payment and moving your things. And to start a family, you’ll need savings for all the gear you’ll need once the baby arrives as well as for possible medical costs in case you need to make up for lost income.

How Much Should Go Into Savings?

There’s not an easy answer. First, figure out how much of your paycheck you should save because it depends on your specific goals. Think about the timeline of your goals and go from there.

For example, there are short and long-term goals. Short-term savings goals are for anything from less than a year to a few years into the future. Examples include replacing your stove, that vacation to Cancun or setting aside funds for a down payment on a home. Long-term goals are things you’re looking at more than 5 years down the line, like retirement.

For these goals you’ll want to think about the specific dollar amount and work backwards to see how much you can realistically set aside each month. For example, let’s say you want to have $20,000 for a down payment, $5,000 for a vacation to Cancun and $1,000 for a new stove in the next 5 years. You’ll need to save $5,200 in a year, or $100 every week.

If you’re still confused, don’t worry. We’ll cover some other common savings plans below.

Something else that’s equally important is setting aside money for an emergency fund. This is a specific amount of money earmarked for unforeseen circumstances like when your car breaks down, your HVAC needs repairs or you need emergency dental surgery.

Most experts recommend that you build your emergency fund to the point where you can cover at least 3 – 9 months of living expenses. It sounds daunting, so don’t feel like you have to do this all at once. Even $25 a week is good enough. Take a look at what you can eliminate from your budget (like your fancy cable TV package) or pack your lunch a few times a week. Both of these options (and others) can make a big difference.

Savings Plans

Using the above guidelines to calculate an emergency fund and savings goals can be useful. For extra help (especially if you’re still wondering how much you need to save per paycheck) here are two rules commonly touted by experts to help you save.

The 50/30/20 Rule

This popular rule suggests you set aside 50% of your income to go toward essentials like housing, food and transportation, 30% for discretionary expenses and 20% for savings.

Take this rule and calculate what you should be saving according to your income. Then take a look at your above goals and see if it matches. If it doesn’t, try to see if you can make it match. If your savings goals are above 20%? That’s great news!

The 10% rule

This rule typically applies to retirement savings. Conventional wisdom says you should save at least 10% towards retirement. This percentage can sound scary at first, but consider your employer when it comes to this amount. That’s because your employer may offer a 401(k) and will match part of your contributions (i.e., free money). That can bump you up to a 10% savings rate. If not, work on increasing your savings little by little until you eventually reach that amount.

How To Increase Your Savings

Boosting your savings doesn’t have to be hard or painful.

Here are a few suggestions on how you can get started:

Take advantage of automation: Start small with an automatic savings plan by transferring money from your checking account to a savings account regularly. Consider asking your human resources department to deposit a part of your paycheck into your savings account and then put the rest into your checking account.

Use your bonuses and tax refunds: If you’re lucky enough to get bonuses at work, use that toward savings instead. Or if you happen to get a tax refund one year, you can use that towards your savings as well.

Increase savings 1% at a time: Setting aside an extra 1% of your income toward savings will likely not make a big difference in your spending habits. Once you’re used to not having that amount of money, increase your savings by another 1% and so forth.

Start a side hustle: If you find your income just isn’t enough, consider a side hustle to earn a bit of extra cash. Many don’t even require you to leave your home and with most you can work around your busy schedule.

Start Saving Today

It doesn’t matter how small your savings are today, the important thing is that you’re taking proactive steps toward a savings goal. No matter how much you save, be consistent in your efforts. You’ll be pleasantly surprised at how much you can set aside even with small dollar amounts regularly over time.

Sarah Li Cain

Sarah Li Cain is a freelance personal finance, credit and real estate writer who works with Fintech startups and Fortune 500 financial services companies to educate consumers through her writing. She’s also a candidate for the Accredited Financial Counselor designation and the host of Beyond The Dollar, where she and her guests have deep and honest conversations on how money affects our well-being.