How much should I save each month?

So, you’ve decided it’s time to start saving money… Congrats! That’s a great step towards better financial habits. But if you’re not sure how to answer, “How much should I save each month?”— don’t worry, we’ve got you covered. Using a few key guidelines, we’ll walk you through how to arrive at your specific savings goal.

Determining how much to save is not a one-size-fits-all task; it involves weighing your specific needs, desires, and income stream. It’s important you don’t spend all your monthly income at once — or on one thing. How much you should save will depend on what you’re looking to save your money for or buy, and your current financial situation.

Whether you are putting away money into a savings account to save for a big purchase, life event, or protecting yourself for a rainy day or emergency, it’s critical to earmark a portion of your income each month for the future. But how much to save depends on a variety of factors, which we’ll explore below.

What percentage of income should I save?

A common rule of thumb when determining how much to save in a month is to start with a budget breakout built around your necessities, discretionary expenses, and savings. Here’s what we mean by those categories:

• Necessities includes monthly expenses related to food and shelter, such as rent, a mortgage, groceries, and utility bills.
• Discretionary expenses include entertainment and shopping expenses, such as special dinners out or going to a concert.
• Savings includes money you’ve carved out for future expenses. There are a range of categories this may cover — starting with a safety net for an unexpected expense emergencies (more on this later) — but may also include money for life’s big milestones and wish list items.

Then based on your needs, you apply a percentage to each category. Here are three options:

• 50/30/20 rule – This puts half your income towards necessities, the next 30% toward discretionary purchases, and 20% towards savings.
• 70/20/10 rule – This ratio may be more within reach if you don’t have a lot of flexibility with your essentials.
• 80/20 rule – This simplified approach puts most of your income toward both necessary and discretionary expenses and 20% toward savings and debt reduction.

So, what percentage of income should you save? The best percentage is one you can stick with, allowing you to consistently make progress toward your financial goal.

Need help building your savings? With Spruce mobile banking, you can choose to tuck money away automatically for the goals you choose. Find out how Spruce’s savings goal feature makes it easy save to step by step.

Spruce fintech platform is built by H&R Block, which is not a bank. Bank products by Pathward®, N.A., Member FDIC.

How much should you save a month?

Determining how much you should save a month is an exercise you can complete by plugging in your own income and expenses. To see what that looks like with the 70/20/10 rule, let’s take an annual income of $36,000 (take-home), which is $3,000 monthly.

So, on a monthly income of $3,000:  

• 70% or $2,100 should go toward necessities
• 20% or $600 should go toward discretionary spending
• 10% or $300 should go toward savings

To break this down even further and answer the question, “How much should I save each paycheck?” you’d have one more step that will be based on how often you’re paid.

If you’re paid twice per month, you’d need to then divide the calculations above by two to determine how much to save each paycheck. For this example, you’d save $150 each month.  

How much should I save for an emergency fund?

As mentioned above, if you don’t have a safety net for emergencies, it should be one of your top priorities when determining how much of your income you should save. 

Having emergency savings as a safety net can cover expenses in the event of a loss of a job, medical bills due to a sudden illness or accident, or funds to cover major expenses that arrive unexpectedly, such as a new roof or fixing a broken appliance in your home.

If you’re wondering “How much should I save for an emergency fund,” it’s a good idea to start with three months’ worth of expenses.

So, for the $35,000 annual income and 70/20/10 example above, you budgeted $2,100 monthly toward necessities. To cover three months of expenses, you’d need to save $6,300 for your emergency fund.

This may sound like a lot, but you don’t have to come up with this money all at once. You can put money away little by little. Review these saving tips to help get you on your way, and find out how money saving apps may help.

How much of your income should you save when you have multiple goals?

If you’re saving for more than one goal, you’ll want to split your savings percentage between each goal. It makes sense that you’d want to carve out a larger percentage for more important goals to help you reach them faster. Additionally, you may want to focus on fewer goals, so your savings are not too spread out.

Saving up vs. using credit: How Spruce can help

While credit cards may help you get these purchases faster, saving up and using cash instead can be a big step toward better money habits.

Tools such as Spruce’s savings goal can help you along the way. What’s more, Spruce has other features such as overdraft protection^{Disclaimer number6. Go to disclaimer for more details.} and cash back rewards^{Disclaimer number1. Go to disclaimer for more details.} that can help put you on the path to getting better with money day by day.

Find out more about all the features Spruce has to offer. 

Get started with Spruce! 

This information provided for general educational purposes only. It is not intended as specific financial planning advice as everyone’s financial situation is different.