How Much Money Should You Save Each Month?

The amount you should save each month depends your goals. A popular budgeting strategy, known as the 50/30/20 budget, can be a good place to start.¹

Here’s how you would allocate your after-tax take-home pay:

• 50% for essentials/living expenses like housing, food, and utilities
• 30% for discretionary spending like eating out and entertainment costs
• 20% for debt repayment and savings like paying bills, short-term savings, and retirement

For example, if you earn $5,000 each month, you should aim to save $1,000 each month.

Of course, that may not be realistic for your current financial situation. Paying toward student loans or credit card debt might take up a big chunk of that 20%, for example.

Or, you find that you want to and are able to save more. That’s ok too. Instead, you want to aim for a savings goal that will work for you.

Understanding your financial goals is a good place to start when deciding how much of your income you should save each month. Here are a few savings goals you may want to work towards:

• Saving for a down payment on a home
• Setting aside money for a wedding
• Putting cash away for your child’s future college costs
• Getting a head start on retirement planning
• Building an emergency fund

Once you establish your goals, determine how much of your income you should save to dedicate to each goal, as well as what factors can affect the amount you’re able to save.

When finding the savings strategy that works best for your financial situation, the following factors can impact how much you can save each month:

• Age
• Marital status
• Income
• Family responsibilities
• Debt obligations
• Life goals
• The time you want to reach your financial goals

Typically, the higher your income, the more you may be able to set aside. The same goes for if you don’t have many debt payments and family responsibilities. On the other hand, you can choose to save less if your goal is years away.

Once you have an idea of how much you want to save, it’s time to start thinking about some strategies to help you get to your goal. Even if you can’t save the exact amount you want now each month, any little bit helps, and find ways to work towards higher amounts. You may also want to prioritize your goals, like getting the employer match for your 401(k) or having enough for two months’ worth of emergency savings.

Aiming for a comfortable retirement and managing monthly expenses require smart savings strategies. Here are a few tips to boost your savings.

• Review and adjust monthly expenses: Regularly assess your monthly expenses to identify areas where you can cut back. This might include renegotiating bills or eliminating unnecessary subscriptions.
• Get high-interest rates: Take advantage of accounts offering higher interest rates. This could mean moving your savings to a high-yield checking account or considering other investment options.
• Take advantage of your employer-sponsored 401(k) plan: Typically, your contribution to a 401(k) plan comes from your pre-tax income, which helps you lower your taxable income. Some companies will match your contributions up to a certain percentage.
• Contribute to an IRA: Regularly contributing to an IRA can be a powerful way to grow your retirement savings, thanks to its tax advantages and potential for compound growth.
• Automate savings: Depending on your spending and savings account, you might have automatic savings features making it easier to save money. Even if not, you can set up automatic payments through your financial institution — it can go towards a separate savings or retirement account.
• Evaluate and reduce high-interest debt: Paying off high-interest debt can free up more money for savings. Prioritize debts with the highest interest rates to reduce overall financial strain.
• Increase savings with income boosts: Whenever you receive a raise, bonus, or any additional income, put a portion directly into your savings. This approach helps gradually increase your savings without significantly affecting your current lifestyle.
• Seek financial advice: Consult with a financial advisor to tailor your saving strategies according to your personal financial situation and goals. They can provide insights on investment options, tax-saving strategies, and more.

By implementing these strategies, you can increase your savings and be better prepared for the future.

Got a big raise or bonus? Set aside a little extra money for your savings. Had a job loss or had to tap into your emergency fund? Know that it’s okay to skip a month of adding to your savings.

Once you’re clear on how much you should save each month, it’s time to take action.

Pick one strategy first to keep yourself from getting too overwhelmed. Then, once you feel you have a handle on that, pick another one. Small steps are better than not taking any at all.

Keep in mind there’s no one-size-fits-all monthly savings plan. With fluctuations in income and financial needs, it can be hard to predict everything. Being aware of your monthly savings is a great step toward handling the unpredictable and maintaining long-term financial stability.

And if you’re someone who needs a bit of motivation (or to make saving money a bit more fun), check out our guide on the 30-day savings challenge.