How much should I save each month? – Forbes Advisor


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Most people know the importance of saving, but deciding how much to save each month is less obvious. The answer to this question depends on your personal situation. Fortunately, general guidelines can give you a better idea of ​​how much you should be saving.

How much should I save each month?

There is no single answer to determine how much you should save per month. It depends on factors such as your age, income and goals. However, the “50/30/20” approach can give you a general idea of ​​how much income to put aside in a savings account.

This popular rule of thumb suggests that you spend 50% of your after-tax income on your needs (like housing and utilities), 30% on your wants, and 20% on saving and paying off debt.

Let’s look at how that breaks down for someone with an after-tax monthly income of $4,000.

  • Needs: $2,000 (50% of income)
  • Wanna: $1,200 (30% of income)
  • Savings and debt repayment: $800 (20% of income)

Like all financial advice, the 50/30/20 method won’t work for everyone. Saving 20% ​​on every salary may be too high for some and too low for others. If you’re new to your career and live in an expensive area, you might not be able to hit that percentage until you get some raises. And if you’re behind on your retirement savings, you’ll probably want to save more than 20% of your income to catch up.

You can play around with a savings calculator and enter the exact numbers to see how long it will take you to reach your financial goals.

How to increase my savings each month

To increase your savings rate, you must increase your income or decrease your expenses. If you can do both, even better. Here are a few ways to do it.

  • Track your expenses. Knowing where your money is going helps you take control of your finances. Track your expenses manually by going through your bank statements or use a budgeting app that automates the process.
  • Automate savings. Automating your savings is about “paying yourself first” by putting income into your savings before you have a chance to spend it. The best online savings accounts make this easier by offering automatic transfers, rounding, and the ability to directly deposit a percentage of your salary into your savings.
  • Pay off the debt. Having a lot of debt can eat into your income and decrease your ability to save. Focus on paying off high-interest debt first. Once you’ve done this, you can transfer the money you were paying for your debt to your savings.
  • Negotiate a raise. Getting a raise is one of the fastest ways to increase your savings, but only if you save the difference and avoid falling prey to an insidious lifestyle.
  • Earn money on the side. If you’re unable to increase your income through a traditional job, try making money on the side by creating passive income streams.

What should I spend my income on?

According to the 50/30/20 guideline, about half of your income should be spent on fixed needs or expenses. This includes your housing (rent or mortgage payments), utilities, car payments, insurance premiums, childcare, and taxes.

Another 30% of your income can be spent on “needs” or variable expenses. These include groceries, restaurants, entertainment, personal care, clothing, hobbies, home maintenance and auto repairs.

Finally, the remaining 20% ​​of your income should be saved (or allocated to debt if you have any). This includes contributing money to an emergency savings fund, saving for financial goals like retirement and vacations, and paying off any credit card and loan balances.

Why should I save?

Everyone’s goals are different, but here are some of the most common savings goals.

Emergency fund

Emergency funds provide you with a buffer so that an unexpected expense doesn’t destroy your finances. Most experts advise saving at least three to six months of living expenses in an emergency fund. To determine how much to save, list your basic monthly living expenses and multiply that amount by the number of months. If your basic monthly expenses total $3,000, a six-month emergency fund is $18,000.


Saving for your golden years is one of the most important reasons to build up a nest egg. Typically, people save for retirement with retirement accounts such as 401(k)s and IRAs. If your employer offers a pension plan and a business match, try to contribute the maximum amount possible.

goals in life

Whether you dream of buying a house, acquiring a new car, or going on vacation to Europe, most life goals require money in the bank. Your emergency fund and retirement savings should probably take priority, but once you’re on track with those savings priorities, you can start focusing on more fun goals.

Where should I keep my savings?

It’s best to withdraw money you don’t need for day-to-day expenses from your checking account to earn interest and avoid overspending. Here are some of the best places to save your money:

  • Savings account. Savings accounts keep your money safe and sometimes earn interest. Look for accounts with no monthly fees.
  • High Yield Savings Account. A high-yield savings account is a savings account that offers a higher than average interest rate or annual percentage yield (APY), which helps your money grow faster. Many high-yield savings accounts are available for free from online banks.
  • Money market account. Like high-yield savings accounts, money market accounts provide a risk-free place to store money while earning interest. These accounts come with features like debit cards and check writing privileges, making it easy to access your money.
  • Certificate of Deposit (CD). A certificate deposit account offers a fixed interest rate, and the best CD rates are higher than what you’ll earn with the accounts mentioned above. In exchange for fixed interest, you agree to keep your money in the account for a set period of time, which can range from one week to five years or more. There are usually penalties if you withdraw your money early, so CDs are best for money that you won’t need to access for a while.

Find the best online savings accounts of 2022


Knowing how much to save each month is helpful. And if you’re not sure how much to save, start by storing everything you can. The earlier you start saving, the better.


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