• Career & Money

How Much Should You Save Every Month?

4 min

If you’re taking the time to read this blog post, you already know how important it is to save money. Saving money for your future is the best way to reach financial independence and achieve your desired lifestyle.


But if you’re already saving money, how do you know if it’s enough to reach your financial goals? How much of your income should you save every month?

How much should you save every month?

Personal savings reached an all-time high during the pandemic, with 32% of Americans saving money each month. But this is mainly among high-income Americans, and a significant portion of the population still couldn’t cover a $400 emergency if it arose.

Saving something is always better than saving nothing. So if you’re putting away money each month, take a moment to pat yourself on the back.

But if you’re looking for a straightforward answer, most experts agree that 20% is an ideal saving percentage to aim for. And if you’re looking for a budgeting plan to follow, you might consider the 50/30/20 rule. 


The 50/30/20 rule

According to the 50/30/20 rule, 50% of your income should go toward necessary expenses. This includes things like your mortgage or rent payments, food, and utilities.

30% of your income can be set aside for discretionary spending, like a gym membership, eating out, or Netflix. And the final 20% of your income should be set aside for savings.

For example, let’s say your monthly income after taxes is $4,000. That means $2,000 should go toward the essentials, $1,200 can be used for discretionary spending, and $800 goes toward savings.

Of course, you may want to tweak this number slightly depending on your current income level. If you’re a high income earner, you may want to save a larger percentage of your salary.

Whereas saving 20% may feel impossible for some people. In that case, do what you can — could you save 10% of your income each month? Start there with the goal of eventually saving 20% of your income.


What should you be saving for?

Now that you know how much you should be saving, it’s time to think about what that money is going towards. In general, it’s a good idea to have both short-term and long-term savings goals.

Short-term savings goals are typically goals that will take less than a year to achieve. For instance, taking your kids to Disney World for Christmas may be your short-term goal.

But you also want to have long-term savings goals. A long-term goal like buying a new car or a house could take five to 10 years to achieve. Saving for retirement is a goal that will take well over a decade to complete.

Let’s look at three savings goals you should have and what percentage of your income you should put toward each.



It’s a good idea to put 10-15% of your income toward your retirement savings. If this sounds daunting, then you may want to see if your employer is willing to match your contribution.

For instance, if you contribute 5% of income toward retirement and your employer matches that, then you’re at 10%. The important thing with retirement savings is to start as soon as possible to take advantage of compound interest.


Emergency Fund

In addition to your retirement savings, you should save up an emergency fund that can cover six months of your expenses. Your emergency fund will save you from going into debt if your car suddenly breaks down or you end up in the hospital and can’t work for a month.

To calculate how much your emergency fund should be, you need to figure out your monthly cost of living. These are the expenses you cannot do without, like rent or food. Once you figure out that number, multiply it by six, and you have your target emergency fund.


Savings Goals

And finally, you should have personal savings goals you’re working toward. This could be saving for your dream home or paying for your wedding. Write down how much those expenses will cost and when you need to have that money.

For instance, let’s say you want to save $20,000 for a down payment on a home. You’re hoping to buy that home in five years. To reach your goal, you need to save $333 per month, and the more you can save, the faster you’ll reach that goal.


Where should I save my money?

Where you put your savings depends on what you’re saving for. If you’re saving for an emergency fund or a personal savings goal, you may want to open a high-interest savings account.

High-yield savings accounts often pay rates that are 20x higher than the national average. You’ll typically earn these types of rates at an online bank since they don’t have the same overhead expense that branch locations have.

To find the right account, take some time to shop around at a few different banks. Here are some good places to start:


  • Chime: When you open an account with Chime, you’ll receive a 0.50% annual percentage yield (APY). Chime doesn’t charge any monthly fees or overdraft fees, and you’ll have access to over 60,000 ATMs nationwide.

  • Marcus by Goldman Sachs: A Marcus savings account comes with a 0.50% APY. There are no minimum deposit requirements or credit checks necessary to open the account. You can link your savings to a checking account at another bank and easily transfer money over each month.

  • Capital One: Capital One's savings account comes with a 0.40% APY. You can set up automatic transfers each month, and Capital One makes it easy to track your savings goals.


As far as your retirement savings, you should check to see if your employer offers a 401(k). If they are willing to match your contributions, you should go this route since you’re earning free money each month.

If you don’t have access to an employer-sponsored 401(k), you might consider opening an IRA. A traditional IRA is funded with pre-tax money, so you’ll pay taxes on anything you withdraw in retirement.

In comparison, a Roth IRA is funded with after-tax money, so anything you take out during retirement will not be taxed. If you’re trying to decide between the two, consider whether you think taxes will be higher now or when you retire. If you’re still unsure, you might consider asking a financial planner for guidance.


How can I increase my savings?

Now that you know how much you should be saving each month, are you starting to feel discouraged? Don't stress out if you’re not saving 20% of your income or putting 10% toward retirement. Here are a couple of ways you can slowly start increasing your savings.


Cut down on your expenses

If you’re looking for ways to save more, the best place to start is by cutting down on your expenses. The less money you spend, the more you have to put toward savings.

Take a good look at your budget and determine if there are any areas you’re overspending each month. For instance, could the money you’re spending on eating out each month go toward savings?

It’s hard to cut back on your expenses, especially if you’re someone who’s born to spend money. But think about it like this — instead of treating yourself now, you’re rewarding your future self.


Increase your income

Of course, there’s a limit to how much you can cut down on your expenses each month. And if you cut your costs too drastically, you may not be able to maintain this standard of living for too long.

So at some point, you may want to look at ways to increase your income. Is there a way to make more money at your current job, or could you get a better-paying job with another company?

If you like your current job but are maxed out on your salary, you might consider taking on a side hustle. Even earning a few hundred dollars each month could make a massive impact on your savings goals.


The bottom line

Saving money is crucial for your financial well-being, and most experts agree that 20% of your income is a good target savings rate. If saving that much feels out of reach, don’t let that deter you — something is always better than nothing.

Figure out how much money you can reasonably save each month, and stick with it consistently. Over time, as your budgeting skills improve and your income goes up, you can slowly increase the percentage you’re saving.


In addition to your savings, the right insurance coverage can help protect you when disaster strikes and investing in income insurance can protect you and your family from financial hardship. Contact Asteya to learn more about the coverage that's right for you.




INCOME INSURANCE Protect your income from injury and illness. From quote to policy in minutes!

Join the Discussion