How Much Money Should I Save Each Month? - NerdWallet (2024)

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The importance of saving money is clear. It can help you cope with life’s unplanned expenses and set you up for a comfortable future. However, figuring out how much to save can be tricky.

How much of your paycheck should you save each month? Well, that depends on your goals. Many experts aim for somewhere between 10% and 20%, but that’s not a golden rule. So let’s dig into that.

How Much Money Should I Save Each Month? - NerdWallet (1)

How much should you save each month?

One popular guideline, the 50/30/20 budget, proposes spending 50% of your monthly take-home pay on necessities, 30% on wants and 20% on savings and debt repayment.

The necessities bucket includes non-negotiable expenses like utility bills and the monthly minimum payment on any debt you have. The 30% is allocated to leisure spending, such as going out to eat or taking a road trip. The 20% goes toward your savings goal and making extra payments on debt. Since “savings” is a broad term, what exactly does it cover? According to the 50/30/20 rule, the savings category consists of an emergency fund, retirement and other long-term savings goals, such as paying for a home or your child’s college education.

Figure out what’s realistic for you

The 20% rule is a good general guide, but it isn’t the right fit for everyone. Some people can save above that rate, while others merely struggle to make ends meet.

“Some people pay their rent and they have nothing left. So how are they possibly going to save 20%?” says Tara Unverzagt, a certified financial therapist and certified financial planner in Torrance, California. “You need to look at your situation to see what is reasonable and what’s not reasonable.”

You can use a budget planner to compare your estimated monthly spending and saving totals with the recommended 50/30/20 budget figures. Don’t feel ashamed if you’re saving below the suggested rate or nothing at all. There may be ways to save, make or even stop spending money that can help you increase your savings contributions. For example, canceling a rarely used gym membership could free up around $40 or $50 every month.

Your income, expenses and goals should ultimately determine how much you’re able to save each month. “If the goal is to retire at 40, you need to save a heck of a lot more than people who are shooting for 65 because you have 25 fewer years for that money to compound,” says Tess Zigo, a CFP in Palm Harbor, Florida.

Before you build a budget

NerdWallet breaks down your spending and shows you ways to save.


Start with something

If saving roughly 20% of your monthly paycheck isn’t within reach, you may feel discouraged about saving altogether. Try not to get hung up on a specific number. As Unverzagt puts it, “any savings is good savings.”

Unverzagt says, start with a manageable amount, such as $10 per week or paycheck. Setting aside $10 each week adds up to $520 a year. That’s a solid amount for a starter emergency fund.

Putting savings into a high-yield savings account is one way to leverage compound interest and further grow your savings. To see how much your savings could potentially grow, try out our savings calculator.

Ideally, you’ll save toward multiple financial goals at once. But if you can’t, it’s OK to prioritize. For example, focus on building a basic emergency fund first, then on saving enough to get the employer match on your 401(k) — if you have one. After that, you can move on to increase retirement contributions or establish a full emergency fund of three to six months’ worth of living expenses.

Can you save too much?

Having a lot of money saved seems like a good problem to have. But it can have disadvantages. For example, if saving gives you anxiety or causes you to take on debt, you may want to dial back.

“There could be a lot of downsides, right? You’re working more than you need to, so you’re giving up time with your family. You’re not spending that time and that money on things that are important to you today,” Zigo says. “You can’t take the money to the grave, so what is the end goal here?”

Keep your values in perspective. Saving for the future shouldn’t come at the expense of your present-day needs and those of your household.

Maxing out your 401(k) can be appropriate for someone who’s making $120,000 and single with no family. It may not be appropriate for somebody who is not in that situation,” Unverzagt says.

In any case, it’s important not to overshoot your savings. If you tie up too much money in a retirement account and end up needing to withdraw early, you could face taxes and penalties. A retirement calculator will help you work out a realistic number.

Storing too much in an easily accessible savings account, say for an emergency fund, can also backfire. For example, you can miss out on higher returns compared with investment accounts or the tax savings you’d get by directing some of that money to a 401(k) or IRA.

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How Much Money Should I Save Each Month? - NerdWallet (3)

How to save money every month

Whether you want to start saving money or get better at it, here’s some advice:

Pay yourself first. Each time you receive a paycheck, immediately sock some of it away for savings before you can spend it on other expenses. This budgeting approach is known as pay yourself first.

Automate. Control the amount and how often you save by automatically setting aside a portion of each paycheck. “The 401(k) is a great place to start because you don’t have to do much,” Zigo says. “The company gives you the website. You just go in and click a few buttons and pick a percent to contribute.”

You can also set up automatic transfers to your savings account or IRA through your financial institution or a savings app.

Talk to someone. A reliable friend, relative or financial advisor can help you figure out what’s holding you back and identify ways to move forward.

“People are suffering alone. Because of shame and embarrassment, and the feeling of being vulnerable, they’re not having conversations that they should be having,” Unverzagt says.

Hiring a professional can be expensive, but there are also ways to get quality free or inexpensive financial advice.

Audit your finances periodically. Circ*mstances change. So should your approach to saving money. As your income and expenses fluctuate, adjust your savings rate as needed.

How Much Money Should I Save Each Month? - NerdWallet (2024)


How Much Money Should I Save Each Month? - NerdWallet? ›

Create a 50/30/20 budget

What is a good amount of money to save each month? ›

At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.

What is the 50 20 30 rule? ›

One of the most common types of percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. Learn more about the 50/30/20 budget rule and if it's right for you.

What is the 75 15 10 rule? ›

In his free webinar last week, Market Briefs CEO Jaspreet Singh alerted me to a variation: the popular 75-15-10 rule. Singh called it leading your money. This iteration calls for you to put 75% of after-tax income to daily expenses, 15% to investing and 10% to savings.

Is $20,000 a good amount of savings? ›

Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.

Is $1,000 a month good savings? ›

Saving $1,000 per month can be a good sign, as it means you're setting aside money for emergencies and long-term goals. However, if you're ignoring high-interest debt to meet your savings goals, you might want to switch gears and focus on paying off debt first.

Is 500 a month a lot to save? ›

Saving £500 each month is a great goal if you can manage it. Over the course of a year, you would save £6,000, which could be used for things like emergency funds, retirement savings, or big purchases like a house or car.

Is $4000 a good savings? ›

Ready to talk to an expert? Are you approaching 30? How much money do you have saved? According to CNN Money, someone between the ages of 25 and 30, who makes around $40,000 a year, should have at least $4,000 saved.

How much should a 30 year old have saved? ›

If you're 30 and wondering how much you should have saved, experts say this is the age where you should have the equivalent of one year's worth of your salary in the bank. So if you're making $50,000, that's the amount of money you should have saved by 30.

How to budget $5000 a month? ›

Consider an individual who takes home $5,000 a month. Applying the 50/30/20 rule would give them a monthly budget of: 50% for mandatory expenses = $2,500. 20% to savings and debt repayment = $1,000.

What is the 10 credit rule? ›

The 20/10 rule follows the logic that no more than 20% of your annual net income should be spent on consumer debt and no more than 10% of your monthly net income should be used to pay debt repayments.

What is the cash Rule of 72? ›

It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.

What is the financial rule of 10? ›

The 10% rule is a savings tip that suggests you set aside 10% of your gross monthly income for retirement or emergencies. If you still need to start a savings account, this is a great way to build up your savings. You should create a monthly budget before starting your savings journey.

How many people have $20,000 in savings? ›

Other answers revealed that 15 percent had between $1,000 to $5,000, 10 percent with savings of $5,000 to $10,000, 13 percent boasted $10,000 to $20,000 of cash in their bank accounts while 20 percent had more than $20,000.

What is too much to have in savings? ›

Gaines reiterates that even most high-yield savings accounts lose value to inflation over time. “More than two months' worth of living expenses in a savings account is too much given the ability to earn around 5% from easily accessible money market accounts that should not fluctuate in price.”

Is 100k in savings a lot? ›

When your savings reaches $100,000, that's a milestone worth marking. In a world where 57% of Americans can't cover an unexpected $1,000 expense, having a six-figure savings account is commendable.

How much should the average person save a month? ›

The standard rule of thumb is to save 20% from every paycheck. This goes back to a popular budgeting rule that's referred to as the 50-30-20 strategy, which means you allocate 50% of your paycheck toward the things you need, 30% toward the things you want and 20% toward savings and investments.

How much does the average person save in a month? ›

Savers say they typically set aside $985, on average, in a normal month, according to the survey. The median amount reported is $250. This includes money put in traditional savings vehicles such as certificates of deposit and savings accounts, but also kept as cash at home.

Is saving $50 a month good? ›

Investing only $50 a month adds up

Contributing $50 a month to an investment account can help create impressive savings, even at a moderate 5% annual growth. It's a common myth that you need a few thousand dollars to begin investing.

How much will I have if I save $100 a month for 30 years? ›

Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100. If you make a monthly investment of $200, your 30-year yield will be close to $400,000.


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