How Much Should I Save Each Month?

One relatively common budgeting method is known as the 50/30/20 rule. It involves breaking down your total income (after subtracting taxes) into three categories.

Breaking down the percentages: 

This budgeting method suggests putting 50% of your after-tax income into things you need, 30% into things you want, and 20% into paying down debts, saving money, or both.

Why it works for beginners: 

Because there are just three categories, the 50/30/20 budgeting method may be a simple option for beginners. It may also help build balanced spending habits.

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Each person’s ability to save money may differ based on a variety of factors, including:

Income level and stability

Lower income earners or people with fluctuating income levels may find it more challenging to set aside a full 20% of their pay.

Current debt obligations

The amount and type of debt someone has may impact whether they are able to save money and their level of savings.

Cost of living

Cost of living variations may also influence how much a person may be able to allocate to monthly savings goals. 

There isn’t necessarily an exact savings benchmark that applies to everyone of a similar age. However, it can be helpful to understand general information about how much money a person may have saved, broken down by age:

In your 20s

People in their 20s may be starting out in their careers and may not have as much money to set aside in savings. Someone under the age of 35 living in the United States might have an average savings of $20,540, according to the Federal Reserve Board’s 2022 Survey of Consumer Finances.

In your 30s

As people age, they may advance in a career or business, which may come with additional income. Someone between ages 35-44 in the U.S. might have an average of $41,540 saved, according to the Federal Reserve’s survey.

Retirement milestones

When it comes to retirement, there is not necessarily a one-size-fits-all benchmark by age. Generally speaking, some guidelines suggest working toward saving 10 years’ worth of your salary before turning 67. 

The emergency fund first: 

If you are working on a plan to build your savings, it can be helpful to consider starting with an emergency fund. Generally, a savings goal could be to build up between three and six months of essential living expenses. 

Short-term vs. long-term goals: 

When putting together a budgeting plan or savings plan, it can also be helpful to identify immediate needs as well as retirement needs. Immediate or short-term needs may include expenses like repairing a vehicle or saving up for a wedding or special vacation. 

Sinking funds: 

Designating a savings fund for specific expenses may be another useful tool in building saving habits. Some people may choose to set up multiple savings accounts that are each designated for specific goals, such as a vacation fund, a car repair fund, or an account set aside for buying a home. Some people may find that planning ahead for known expenses may reduce financial stress.

If you are not able to set aside a full 20% of your income, you may want to consider certain habits that could help you work toward that goal:

The 1% challenge: 

It may help to start with a smaller percentage, such as saving 1% of your total income. Over time, you may be able to increase that percentage as you work toward saving more of your income.

Automating your success: 

Some people may find it useful to automatically transfer money into a savings account, like they might do with autopay on bills. Employers may also offer the option to automatically deposit a certain percentage of each paycheck into a savings account.

Using round-up tools: 

Some banks or credit unions offer round-up tools. This typically involves the bank rounding up to an even dollar amount on each purchase you make. That “spare change” automatically gets deposited into your savings account.

Monthly check-ins:

It can be helpful to regularly check on your saving progress. That might include a weekly or monthly review of your account balances as well as your expenses. Regular check-ins can help stay on track with spending and savings goals.

Using savings calculators: 

Savings calculators can be a tool to help determine how much to save for a specific goal, such as retirement. You could also determine a specific dollar amount you want to save, then work backward to calculate the amount that should be set aside at regular intervals, such as daily or weekly.

There is not necessarily a set dollar amount for how much money you should save each month. However, you may find it helpful to review certain guidelines or to set up a budget using a method like the 50/30/20 rule. 

For additional help building your financial foundation, you may want to visit Raisin’s marketplace. It lets you compare high-yield savings products from a network of federally insured banks and credit unions, so you can find an option that suits your savings goals.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.