How Much Should You Save Each Month?
Saving money can feel overwhelming, especially when you're just starting your personal finance journey. You might be asking yourself, "How much to save each month?" The truth is, there’s no one-size-fits-all answer. But don't worry—in this article, we'll break it down for you in a simple, practical, and beginner-friendly way. Whether you're saving for emergencies, a new car, or just want to stop living paycheck to paycheck, we’ve got you covered.
Why Saving Each Month Matters
Before we dive into the numbers, let’s talk about why saving money is important. Saving helps you build a financial safety net. It gives you peace of mind, prepares you for emergencies, and allows you to work toward future goals without relying on credit cards or loans.
Having consistent savings also means you're taking control of your money—rather than letting your money control you. And that’s a big step toward financial freedom.
So, How Much to Save Each Month?
A good rule of thumb is to save 20% of your monthly income. This guideline comes from the popular 50/30/20 budgeting rule:
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50% for needs (like rent, groceries, utilities)
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30% for wants (dining out, entertainment, hobbies)
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20% for savings and debt repayment
If you're making $3,000 a month, that means saving around $600 each month. But if that sounds too steep, don’t panic! The key is to start where you are and build from there.
Start Small, Then Increase
Not everyone can immediately save 20% of their income—and that’s okay. What matters is getting started. If you can only save $50 or $100 a month, do it. As your income grows or expenses decrease, bump up your savings rate. The habit of saving is more important than the amount in the beginning.
Even saving 5% of your income is a win. It means you’re developing the muscle of saving—a habit that will serve you for life. Over time, as you get more comfortable, you can work toward that 20% target, or even go beyond it.
Consider trying the 52-Week Money Challenge to ease into saving. It’s a fun and motivating way to build the habit, even with a tight budget.
Break Down Your Savings Goals
To better understand how much to save each month, it helps to divide your savings into different categories. Here are some examples:
Emergency Fund
An emergency fund is a top priority. Aim to save at least 3 to 6 months’ worth of expenses. Not sure where to start? Check out our guide on how to build an emergency fund step by step.
To calculate your monthly emergency fund savings, divide your total goal by the number of months you want to reach it. For example, if you want to save $6,000 in a year, you’d need to save $500/month.
Even setting aside $50 or $100 each month is a great beginning. Over time, those savings will grow, and you’ll feel more financially secure.
Not sure where to put that emergency cash? Here are some great tips on where to keep your emergency fund.
Short-Term Goals
These are things you want to achieve in the next 1-3 years. It could be a vacation, a new laptop, or holiday gifts. Once you know how much you need, divide it by the number of months until your deadline.
Let’s say you want a $1,200 vacation next summer. That’s $100 a month if you start now. Or maybe you want to buy a $600 phone in six months—that’s just $100 a month.
Breaking down your goals this way makes them feel more manageable. Instead of stressing about coming up with a large amount of money all at once, you can save steadily over time.
Long-Term Goals
Think about retirement, a home down payment, or your kid’s college fund. These require long-term planning and possibly investing. While these can be more complex, putting away even small amounts regularly can make a huge difference over time.
Start by setting a realistic target. If you want to save $10,000 for a house in five years, you’d need to save about $167 per month. Planning ahead like this helps you stay focused and track your progress.
Consider opening a high-yield savings account or even a Roth IRA (for retirement) to maximize your long-term savings growth.
Automate Your Savings
One of the best hacks for saving money is to make it automatic. Set up a recurring transfer from your checking account to your savings account right after payday. This way, you "pay yourself first" and don’t accidentally spend what you intended to save.
Even better, set up different savings accounts for each goal: emergency fund, vacation, car, etc. Naming them can help keep you motivated!
You might also explore savings apps that round up your purchases to the nearest dollar and save the difference. These small amounts can add up over time without you even noticing.
Track and Adjust
Your financial life isn’t static, so your savings plan shouldn’t be either. If your income goes up, consider increasing your savings. If you face unexpected expenses, it’s okay to adjust your plan. The key is to keep reviewing and tweaking it regularly.
Use free tools like budgeting apps or simple spreadsheets to track your savings progress. You can also set visual goals, like charts or graphs, to stay encouraged.
Don’t be discouraged by setbacks. Missed a month? It happens. What matters is getting back on track. Savings is a journey, not a race.
Other Tips to Boost Your Savings
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Cut small expenses: Review subscriptions or dining habits. Could you save $20/week by making coffee at home? That’s $80/month!
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Earn extra income: Try a side hustle or freelance work to increase your savings potential.
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Use windfalls wisely: Tax refunds, bonuses, or birthday money can give your savings a nice boost.
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Challenge yourself: Try a no-spend week or a monthly savings challenge to shake things up.
Final Thoughts
So, how much to save each month? While 20% is a great goal, what matters most is consistency and intention. Start small if you need to, and build the habit of saving regularly. Break down your goals, automate your savings, and don’t forget to celebrate milestones along the way!
Remember, saving money isn’t about being perfect. It’s about making progress. Even slow progress is better than standing still. The important thing is that you’re taking action now.
Want more help reaching your savings goals? Explore these guides:
You’ve got this! Start today, and your future self will thank you.