How Much Should I Save Each Month?

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Updated on Monday, September 9, 2019

When you pad your savings account, you’re ensuring your current and future financial security. Not only does saving provide you with a safety net when life unexpectedly sends you tumbling, but it will pave a way to an enjoyable retirement so you won’t have to work forever.

But exactly how much should you be tucking aside each month? There’s no hard-and-fast rule that everyone should follow, but there are guidelines and money management tips that you should follow. Ultimately, what’s important is evaluating your personal savings goals so you can make them a reality.

How much should I save monthly?

When calculating how much you need to save per month, the first step is to create a budget if you don’t already have one. Without a budget, you won’t have a good idea of how much you’re spending each month and where. If you already have a budget, it’s time to revisit and refine it. Comb through your expenses and see where you can trim the fat (think monthly subscription services that you never use). Take any extra cash and funnel that to your savings goals.

The next step in creating a monthly savings plan is determining your goals. “A proper monthly savings plan will start with forming goals, and will consider different aspects of those goals,” said Dan Stous, a Certified Financial Planner and the director of financial planning and a wealth advisor for Flagstone Financial Management. “What are you saving for? Retirement? An emergency fund? A wedding? Unique goals with their own time horizons and different costs will impact a savings plan.”

Your goal should be to have a long-term savings account, a retirement account and an emergency fund (this should be stocked with enough cash to cover three to six months of expenses). From there, you can get as detailed as possible. If you want to save some cash for a new car, create a new savings account for that goal.

One easy way to get started with saving each month is to take the “out of sight, out of mind” approach. In other words: Automate everything.

“I would recommend automating as much as possible when creating a monthly savings plan,” said Michael Pappis, the CEO and founder of Amity Financial Planning. “For example, if you are looking to start saving in a Roth IRA retirement account, set up an automated system that transfers a set amount of money from your bank account to your Roth IRA each month. That way, you can pay yourself first — by saving for your financial independence — instead of spending this money on unnecessary things.”

No matter what your approach to saving each month is, what’s vital is that you start immediately. In the end, saving something — even if it’s as little as $50 a month — is better than saving nothing.

“Recognizing that you have more than you need and then just putting the excess money in a high-yield savings account, for example, is better than spending it,” Stous said. “It might not be near the amount you should be saving, but again, it’s better than nothing, so don’t let indecision and analysis paralysis prevent you from doing something.”

Understanding the 50/30/20 rule

One solid savings technique is the 50/30/20 rule. Here’s how that breaks down:

  • 50% of your budget is spent on needs, like your rent or mortgage payments
  • 30% of your budget is spent on wants, like dining out with friends or a gym membership
  • 20% of your budget is funneled into savings

Keep in mind that these percentages are based on your take-home pay. Let’s take a look at how the 50/30/20 rule would shake out with monthly savings in mind.

Yearly SalaryTake-Home Pay*Annual Savings (20%)Monthly Savings
*Take-home pay based on 2019 tax bracket for individual taxpayers.

As you can see, the 50/30/20 rule shines because of its simplicity. “One of the main benefits of the 50/30/20 rule is that it establishes a clear framework for someone who wants to begin saving and doesn’t know how to start,” Pappis said. “It allows you to establish a bucket system for your spending and savings that is straightforward and easy to follow.”

How much should I save monthly for retirement?

To make sure you’ll live comfortably throughout your golden years, it’s important to start saving as much as possible for your post-work life.

Begin your retirement savings plan by calculating how much you’ll spend each year of retirement. To make determining this figure easier, consider using a retirement calculator, which considers health care costs, life expectancy, housing expenses and more. Once you have that figure in mind, you can formulate your nest egg goal.

One rule of thumb for retirement savings is the 25x rule, which says that your goal should be to have saved 25 times your annual retirement expenses in order to live comfortably after you stop working. Break that number down into a monthly plan to keep your savings on track.

5 tips to boost your savings

Saving money is important, but sometimes it’s easier said than done. If you’re having trouble getting started saving or want to start saving more, here are some tips that may help you out:

  1. Use a budgeting app. A budgeting app can help you keep your spending and saving on track. By having your budget connected to your phone, your savings goals are always a fingertip away. Before you spend money on something, open up your budget and make sure your savings are up to par first.
  2. Stash the bump. If you get a raise, save that extra money instead of spending it. “This avoids ‘lifestyle creep,’ which is the tendency to spend more over time without even realizing it,” Stous said.
  3. Automate it. As we mentioned, make savings a priority by setting up an account and having money from each paycheck automatically deposited there.
  4. Cut expenses. Go through your monthly expenses and cut back. Two easy areas to reduce spending include dining out and subscription services. Instead of meeting friends at a restaurant, have them over for a potluck dinner. Cut out any subscription services that you haven’t recently used. Take all that extra cash and stick it in your savings account.
  5. Be realistic. Avoid burning out on saving by setting unrealistic goals. If you save more than your budget can actually handle, you could end up quitting altogether. Start small for a better chance at sticking to the plan.

The bottom line

Saving monthly is vital to establishing financial security in both the short- and long-term. The key is to get started with a plan that works for you. Think about your financial goals and the best way to attain them. Then get started and watch your savings steadily increase.