How Much Should You Save a Month? A Guide to Financial Security

Written By
Julija A.
July 06,2023

A consistent saving habit is one of the pillars of a healthy financial life. It’s never too early or too late for you to start saving money for both short-term and long-term financial goals. In other words, you need an emergency fund, medium-term savings for a house down payment or your children’s college tuition, and a robust retirement account. 

But how much should you save a month to reach your goals, and how do you know if you’re on the right path to financial security? The amount and allocation system for your savings is determined by both your future goals and the way you want your life to look while you’re putting money aside. While there is no solution that is suitable for everyone, there are some guidelines you can follow that will help you create a smart savings plan.

Contributing towards a nest egg for a distant future can be challenging when you have bills that need to be taken care of today. Additionally, we can all agree that going away for the weekend every once in a while is a much more exciting way to put your hard-earned money to good use than saving it for a rainy day. That’s why we’ve made sure to explore a few key factors you’ll probably want to save. 

Saving for Emergencies

While savings goals may vary by age in other categories, keeping a stash of money aside to respond to the financial surprises life throws your way is a must, no matter how old you are. An emergency fund is essential. It works like a financial cushion that protects you from having to take out a loan and use a credit card - both of which can damage your financial health and negatively impact your credit score. 

If you don’t have any emergency savings, we suggest you start with allocating $500 to $1,000 - a small amount that can help you avoid debt for covering car repairs or medical bills.

While this money-saving option is a good starting point, you shouldn’t stop there, provided that your current financial situation allows it. Ideally, your emergency stash should be enough to cover three to nine months of living expenses so that you can afford to put food on the table and pay your bills even if you lose your job or get sick.

Saving for Retirement

If you’re looking forward to retiring comfortably, it’s vital that you start saving for it as soon as possible. The earlier you begin accumulating your retirement savings, the more time the money will have to grow.

But how much should you save a month for retirement? Most financial experts recommend saving at least 15% of your gross income, including any employer match. Allocating an even larger percentage would be ideal - as long as you can afford it. 

Still, if you can’t save 15%, allocate what you can, even if it doesn’t seem like much at the time. Make sure to contribute enough to at least get your employer’s match, provided they offer one. Otherwise, you’d be giving away free money. As your income increases or you manage to pay off debt, you’ll be able to save a larger percentage of your salary for retirement. 

Here’s a pro tip - automatize your retirement contributions. If the money is taken out of your paycheck before it appears in your checking account and is sent to your retirement savings or investment accounts, it’ll be easier for you to get used to living without it. 

If you prefer a retirement account that doesn’t have anything to do with your workplace or if your employer doesn’t offer one, we suggest you consider opening an IRA. Additionally, if you’re self-employed, look into 401(k) solutions. 

Saving for Mid-Term Goals

Making sure that you allocate enough money for unexpected situations and retirement is vital for achieving financial freedom. However, even when you’re on the right track to reaching these long-term and short-term savings goals, chances are you’ll always have other important things that you’d want to save for, including a new car, a down payment for a new home, or your children’s college education. Saving as much as possible for these mid-term goals is also very important for preserving your financial health. 

It’s easy to figure out how much you need to allocate for these goals each month. All you have to do is divide the amount of money you need to save in total by the amount of time you have to reach a particular goal. Here’s an example. Let’s say you want to buy a new car in the coming year and a half, and you want to put down $4,500. In this case, your monthly savings goal should be $250.

If you have any income left after saving for a specific purpose, it’s widely recommended you put it into a retirement account and contribute towards your lifetime savings goal. In addition to opening a high-yield savings account, we recommend you diversify your retirement stash and explore investment options such as index funds or mutual funds. Also, keep in mind that saving and investing are two very different things, and the terms shouldn’t be used interchangeably. 

How Much Should You Save a Month: The 50/30/20 Rule

According to the so-called 50/30/20 budget rule, your after-tax income should be divided in the following way: 50% should be allocated for essentials such as bills and food, up to 30% for discretionary spending, and a minimum of 20% for savings. The term was popularized by Democratic Senator Elizabeth Warren, who reportedly taught it to her students while working as a bankruptcy professor.

While the recommendation to save 20% of your monthly income is an excellent guideline, it’s not always easy to suggest an average household savings rate that suits everyone. 

For example, you may be a high earner. In that case, it would be smart to keep your expenses down and save a much larger chunk of your income. 

On the other hand, you may have a small income and find it impossible to allocate a significant chunk of it for future goals. Still, you shouldn’t get discouraged, even if this is your current situation. Keep in mind that saving something - no matter how small your stash might be - is still much better than giving up on saving altogether. 

However, if you want to meet your retirement savings goals while also accumulating some extra cash for other things, you should strive to save at least 20% of your income. 

Boosting Your Savings

If you’re worried that you won’t be able to save enough for the future while being able to cover life’s expenses comfortably, we suggest you explore different ways to increase the gap between your income and expenses. 

Here are a few strategies you can employ to reach any short- or long-term savings goal.

  • Get a side job: Even a few extra dollars a week from a side gig can make a significant difference to your bottom line.
  • Make the most of raises and bonuses: Instead of letting it contribute to lifestyle inflation, when you get a raise or receive a bonus, save the extra money by depositing at least a percentage of it into your savings account.
  • Apply for a job with a different company: Some companies offer better salaries than others. Make sure to explore your options, and you may end up with a similar job at a company that provides better workplace benefits such as retirement matching.
  • Get a different type of job: Another way to increase the average amount in savings you’re able to allocate is by getting a different, better-paying job. Keep in mind that this can hardly happen overnight as it may require you to learn new skills. However, if you want to increase your earnings and, therefore, savings potential, even going back to school may be worth a shot. 
  • Automate your savings: Automating your savings is a simple, powerful, and relatively painless way to stay consistent with contributing to your stash. Even if you are unsure about how much to keep in savings, it’s a smart choice to set up automatic transfers of any amount you can comfortably afford to allocate for future goals. You can arrange automatic transfers from your checking to your savings account or set up transfers directly from your paycheck to a savings or a retirement account. 
  • Reduce your expenses: Lastly, we suggest you review your budget and find a way to reduce your expenses. After all, finding a way to spend less will automatically mean that you’ll be able to put more money towards your savings goal. In addition to automating your savings, we suggest you de-automate your spending. Review your habitual expenses focusing on streaming subscriptions, housing expenses, transportation costs, and other regular purchases to identify the areas where you can cut back on unnecessary expenses to save more. 

No matter which of these strategies you decide to employ, keep in mind that sacrificing too much and pushing yourself too hard can become counterproductive. So, how much should you save a month? It’s all about striking a balance between your desired living standards in the present and the future. 

Where to Keep Your Savings

The right place for stashing your savings depends on your goals. A rainy day fund that consists of three to nine months' worth of basic expenses should be stored in a liquid place such as an online savings account, preferably not at the same bank where you have a checking account.

Money for mid-term financial goals, such as your kid's college fund or a savings fund for a home down payment, is best kept in medium-term savings vehicles, such as a 529 account (for education) or a brokerage account with the right mix of stocks and bonds.

Lastly, your long-term retirement savings should reside in your retirement account, for example a 401(k) or an individual retirement account (IRA). Given that they are tax-advantaged, employer 401(k) accounts are among the most popular ways to stash money for retirement. Additionally, your employer may match up to a certain percentage of the fund you invest.

Note that your options for saving for retirement with a 401(k) plan may be limited by what your employer offers. Still, you should regularly revisit and rebalance your portfolio to ensure that you’re able to meet your retirement timeline. Alternatively, you can set up an IRA that won’t have anything to do with your workplace benefits. 


What is a good amount to save per month?


How much should you save per month for a house down payment, a new car, or early retirement? While the ultimate objective is financial security, the answer to this question depends on the individual. The amount that’s right for you may be nowhere near adequate for someone else. Still, keep in mind that at least 20% of your monthly income should be put towards reaching your future financial goals. If you can comfortably afford to save more, that’s even better. On the other hand, saving less can slow down the process.

How much do most 30-year-olds have saved?


Statistics on the average amount of savings by age reveal that those in their 30s should have approximately $47,000 in savings, assuming they earn an average salary. This figure is based on the recommendation that you should have the equivalent of your annual salary saved by your 30th birthday. 

Is it better to invest in a 401k or savings account?


We’ve already answered the underlying question: how much should you save a month? But it’s also wise to think about the best place to keep your money. Investing in a 401(k) gives you advantages that make this type of account an excellent solution for long-term retirement goals. On the other hand, if you’re saving money for a mid-term goal, such as buying a new car, we suggest you keep the money in a high-yield savings account.

About author

Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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