How Much Should You Save Each Month?

Not sure how much money you should save each month? The easy answer is — save as much as you can. That being said, there are several methods to use to help you maximize saving each month without creating undue financial hardship for yourself.

Some experts have long advised saving at 10% of your income as a fund for emergencies or future planning. The 50-30-20 rule is another popular guideline. The “20”, in this case, refers to saving 20% of your income each month, a worthwhile goal to be sure (we’ll cover this rule in a moment). With people living longer, people need to save more and 20% is a wise guideline.

It’s important to know how much you should save, how to prioritize your savings and how to reach your savings goals. The sooner you build up a solid savings account, the sooner your savings can work for you. 

Monthly Savings Plan

The best savers save at least 20% of their annual income, which is why we like the 50-30-20 rule. This budget strategy allocates 50% of your after-tax income for necessities, such as housing, food and other bills. Another 30% of your income goes to your “wants,” like clothing and entertainment. Finally, the last 20% is set aside for savings. 

Your savings funds will include your emergency savings, retirement savings, or any money you set aside for a specific goal. A family vacation, for instance, or a down payment for a home are both common savings goals. 

Saving 20% of your income may seem daunting, but you can take steps to ease the burden. You might take advantage of your workplace retirement plan, for example, to save pre-tax money. 

If you can’t meet the 20% threshold right now, experts still advise saving as much as you can. The 20% goal is just that–a savings goal to strive for. It’s more important to focus on what you’re saving for. If you can only save 10% right now, that is still progress that moves you closer towards your life goals. 

How Should You Prioritize Your Savings

Once you know how much you will be saving, figure out how you’re going to prioritize it to address your goals. It is smart financial planning to achieve your emergency savings goal and make regular contributions to retirement savings before saving for your child’s college education or major purchases. . 

You might consider opening separate savings accounts for each of your goals. Here are some important considerations when prioritizing your savings:

Emergency Savings 

Most experts recommend saving three to nine months of living expenses, which are strictly the necessities you need to live. This includes your mortgage or rent, food, laundry and your bills. 

Interest Debts

Try to eliminate debt from interest credit cards, loans, and lines of credit. The interest costs you a lot of money over time so the sooner you pay it off, the sooner you can save that money. 

Retirement Savings

According to a Bureau of Labor Statistics’ survey, one in four Americans with access to a retirement plan don’t participate in it. If your employer offers a retirement savings plan, take advantage of it, especially if your employer matches your savings contributions. 

If you don’t have access to an employer retirement plan, invest in an individual retirement account (IRA) or a solo 401{k) option if you’re self-employed. 


Once you fund your emergency savings account, and you’re contributing regularly to your retirement savings, consider starting a 529 college savings plan for your child. 

Savings for Major Purchases

You may want to set aside savings for a specific goal, such as a house, vehicle, your child’s education or a family vacation. To calculate your monthly savings for this goal, divide how much money you will need by the amount of time you have to save. For example, if you want to purchase a $15,000 car in two years, you’ll need to save $625 each month ($15,000 divided by 24 months).

How to Increase Your Monthly Savings 

Here are some strategies you can use to meet your savings goals:

The Bill Method

This strategy helps determine how much money you should regularly direct to your savings account. You should treat your savings as a bill you must pay before all your other bills. “Paying yourself first” in this way is a proven technique to save successfully. 

See if your employer will allow you to set up direct deposits to more than one bank account. If so, have your payroll department direct a percentage of your paycheck, the most you can comfortably afford, to your savings account. Then direct the rest to your checking account. 

If your employer won’t automatically deposit your check into two accounts, you can still achieve this objective on your own. Set up automatic transfers to your savings account on the same day your paycheck deposits into your checking account. Automating the process ensures your savings money won’t stay in your checking account for too long, reducing the temptation to spend it. 

The Budget Method

After accounting for your fixed and variable expenses, designate the remaining funds for your emergency funds, retirement savings, or other savings funds. The 50-30-20 rule is an often recommended budget strategy. 

The budget method also helps you identify areas within your budget where you can save. Review your budget regularly with an eye towards trimming the fat. 

Reduce Expenses

The less you spend the more money you have for your savings. Still, drastic cutting is hard to maintain. Try to find a balance between saving for the future and living your life now. 

Increase Your Income

The more money you earn, the more you can put towards your savings goals. Asking for a raise, getting a new job, starting a side gig or saving your raises are great ways to increase your income. 

Take advantage of raises and bonuses to increase your savings. If you get an annual raise, for instance, divert some or all of it to savings, before you get used to the extra money. In this way, a 2% raise can become a 2% increase in savings. 

The Bottom Line

When you diligently save each month, your savings will grow very quickly. It’s not unreasonable to save 20% of your income each month but it’s fine if you can only save 10% or less each month to start. 

The key is to start saving regularly. Then over time, you can use the strategies above to increase the amount you save each month. You can even save more than 20% eventually and reach super-saver status.

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