How Much Should I Save Each Month? Smart Rules for Every Budget
Written by
Jacob Wade
Edited by
Melanie Grafil
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Saving money is the foundation for achieving your goals — whether you’d like to buy a home, retire early or simply have peace of mind.
How much do you need to save, though? This guide breaks down exactly how much you’ll need to save and how to adjust your savings to your lifestyle.
How Much Should You Save Each Month?
How much you save is going to be dependent on your income, fixed expenses and spending choices throughout the month. A good rule of thumb is to save at least 15% to 20% of your income every month.
The 20% savings amount comes from the popular 50/30/20 rule pioneered by Sen. Elizabeth Warren. And while saving 20% of your income may not be possible right now — it’s a good goal to shoot for.
How To Save Using The 50/30/20 Rule
The 50/30/20 rule was created by Sen. Elizabeth Warren and her daughter, Amelia Warren Tyagi, in their book, “All Your Worth: The Ultimate Lifetime Money Plan.” The book states to split your household spending into three categories:
- 50% spending on needs
- 30% spending on wants
- 20% savings
While it’s not realistic to follow this rule for everyone, the guideline to focus on lowering your monthly costs and setting aside at least 20% of your money each month can help you build your savings balances quickly.
| Category | Percentage | Examples |
|---|---|---|
| Needs | 50% | Rent/mortgage, utilities, groceries, transportation, insurance |
| Wants | 30% | Dining out, travel, entertainment, subscriptions |
| Savings/Debt Repayment | 20% | Emergency fund, retirement, extra loan payments |
What If You Can’t Save 20%?
Saving 20% of your income might seem daunting, but it’s the best place to start. Even if you only have $25 or $50 to spare, you’ll find it’s easier and more practical to build a savings habit than to hold yourself to a strict savings percentage. The goal is consistency, not perfection.
It might require some sacrifice to save money. You’ll need to set aside your wants and live on a “needs-only” budget for a while. This way, you’ll start building that habit of setting small amounts aside. Over time, you can eventually work on raising your income and monthly savings amount.
Types of Savings Goals
Saving money each month is a great idea, but not all savings goals are created equal. Before you can choose where to put your money, you need to define your savings goals and have deadlines for them. Here are a few types of savings goals to consider when you’re figuring out how much to save each month.
| Timeframe | Example Goal | Suggested Accounts to Use | Suggested Monthly Contribution |
|---|---|---|---|
| Short term (0-12 months) | Emergency fund, holiday gifts, car repairs | High-yield savings account or checking with an autosave feature | -About 10% of income, or -$100-$300 per month, depending on the goal |
| Medium term (1-5 years) | Vacation, wedding, down payment on a home | Money market account, CDs, or short-term brokerage | -About 10% of income, or -$200-$500 per month |
| Long term (5 or more years) | Retirement, child’s college, major investments | 401(k), Roth IRA, 529 plan, brokerage account | -About 20% of income, or -Max out retirement contributions if possible |
Short-Term Savings Goals
Short-term savings goals are usually less than five years away. This might include saving up for emergencies, a planned vacation or simply saving for the holidays. You’ll usually want to stash money into a regular or high-yield savings account for short-term goals.
One trick to hitting these goals is setting up individual named savings accounts for each short-term goal, and setting aside small amounts each month to save into each account. You can even automate this savings strategy by setting up automatic transfers into each account every month, allowing you to hit your savings goals without even thinking about it.
Medium-Term Savings Goals
Medium-term savings goals are usually 5-to-10 years away and tend to be larger savings goals. Examples of medium-term savings goals include saving a down payment for a house, saving up for a car purchase, saving for your child’s education or saving for an investment property.
When saving for medium-term savings goals, you may consider investing in low-risk investments or assets. This can include opening up longer-term certificate of deposit accounts, investing in a money market fund or lending money in the form of bonds or commercial paper. You don’t want to risk these funds in the stock market, but the goal is far enough away to consider investing the money to earn some interest along the way.
Long-Term Savings Goals
Long-term savings goals are 10+ years away and are usually lifestyle-related. This may include retirement, moving to another country or saving for college. When setting long-term savings goals, you’ll usually want to invest the money to maximize your returns to help you hit those goals.
For example, you may want to retire in 30 years and choose to set aside a percentage of your income to invest in your retirement accounts. You may choose higher-risk investments within your retirement accounts, such as stock index funds or real estate ETFs. These investments can help your money compound and reach your goals sooner.
Where To Put Your Monthly Savings
There are several places to stash your money when saving each month. Where you choose to put your savings is highly dependent on what the money will be used for. Here are a few places to consider putting your savings:
High-Yield Savings Account
A high-yield savings account is a type of savings account that offers much higher rates than your standard savings account. In 2024, rates often exceed 5.00% and deposits are protected by the Federal Deposit Insurance Corporation. This is a great place to save for short-term goals.
Money Market Account
A money market account is a type of savings account that pays high interest rates but may also come with check-writing privileges and an ATM card. This gives you more access to your money than a standard savings account, and is a great place to save for a house down payment or other short-term financial goals.
Certificate of Deposit
A CD is a type of timed savings product that pays high interest rates for locking your funds away for a period of time. CDs can help you save for medium-term goals and lock in interest rates for years at a time. But there are penalties for accessing funds early so make sure to only use a CD with money you don’t need for a white.
Brokerage Account
A brokerage account is a type of taxable investment account that allows you to invest in stocks, bonds, mutual funds, ETFs and other investments. While dividends and capital gains are taxable in these accounts, brokerage accounts offer more flexibility than retirement accounts with no restrictions on access to your money. These accounts are good for medium and long-term goals.
Individual Retirement Account
An IRA is a type of retirement account that lets you save on taxes while saving for retirement. You can invest in stocks, bonds, ETFs and other securities and don’t have to pay taxes on dividends or growth within the account. This is a great tax-advantaged account for retirement savings goals.
Income-Specific Recommendations
How much you should save each month depends heavily on how much you can save. That’s why many financial experts recommend adjusting your savings targets based on income level and life stage.
- Lower income: Aim to save 5%-10% of your income, focusing on building an emergency fund. Even small, automated contributions, like $25 a week, can build momentum.
- Middle income: Save 15%-20%, including retirement and emergency funds. Split your savings between short-term goals and long-term investments.
- High income or FIRE-minded: Target 30% or more, using tax-advantaged accounts and index funds. FIRE followers often save 50%+ to reach early retirement faster.
Matching your savings strategy to your income makes your plan more realistic and more sustainable over time.
How To Create a Savings Plan
Developing a savings plan is key to achieving your financial goals. It involves setting realistic targets, understanding your income and expenses and determining the best strategies to put aside a portion of your earnings regularly. Here are some steps you can take to begin your savings plan:
- Assess your financial health: Start by evaluating your income, expenses, debts and financial goals. Create a detailed budget to understand where your money goes each month and identify areas where you can cut back to increase savings.
- Set realistic goals: Establish clear, achievable savings goals. Whether it’s setting aside money for a vacation, building an emergency fund or saving for retirement, having specific targets can keep you motivated.
- Automate your savings: Consider setting up automatic transfers to your savings account. This approach ensures you consistently save a portion of your income and reduces the temptation to spend.
- Review and adjust regularly: Your financial situation can change over time, so it’s important to regularly review and adjust your savings plan. As your income grows or your expenses decrease, you might be able to increase your monthly savings rate.
Figure out how much 20% of your take-home pay is and work toward saving that amount every month. If saving 20% feels too out of reach, start with what you can actually put aside — 5% maybe. At the end of the day, the amount doesn’t matter. The most important thing is getting started.
FAQ: How Much Should I Save Each Month?
Here are the answers to some of the most frequently asked questions about saving money so you can reach your goals.- How much should one person save per month?
- For an individual, saving between 10% to 20% of their monthly income is generally recommended. This, of course, depends on personal financial obligations and goals. It's important to create a budget that accounts for these factors to determine an appropriate amount.
- Is saving $1,500 a month good? What about $1,000?
- Saving $1,500 a month can be excellent, especially if it aligns with your income level and financial goals. It's a substantial amount that can significantly contribute to emergency funds, retirement savings or other financial objectives, assuming it is within your budgeting means.
- Similarly, saving $1,000 is a good amount for most. Considering the median household income was $74,580 in 2022, according to the United States Census Bureau, saving $1,000 per month is the equivalent of saving 16% of your gross income. If your income is lower than the median household income, saving $1,000 a month is much more impressive.
- How much should you have saved at 23? How much should a 30-year-old have saved?
- If you're 23 years old, you might not have much saved -- especially if you just graduated from college. The first order of business is to save at least one month of expenses in a high-yield savings account as your emergency fund. This means you'll probably need $4,000 to $6,000 saved as soon as possible, depending on what you spend in a typical month.
- At 30, this is a good time to ensure you have an emergency fund in place. This should amount to at least three to six months of your monthly expenses set aside in a high-yield savings account. For example, if you spend $5,000 per month, you should set aside at least $15,000 to $30,000 in savings. For retirement, it's a good idea to have at least your annual salary saved in a retirement account by age 30.
Elizabeth Constantineau contributed to the reporting for this article.
The article above was refined via automated technology and then fine-tuned and verified for accuracy by a member of our editorial team.
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- United States Census Bureau. 2023. "Income in the United States: 2022."
