How much should I be saving?   

5 mins readLast updated October 4, 2023by Kate Morgan

‘How much savings should I have’ is an age-old question, and there is no definitive answer. But whatever your age, it’s important to be aware of just how much you should be saving, and whether there are any additional measures you can take to help you reach your financial goals.

It’s rarely easy saving money. The cost of everyday living paired with unexpected expenses like medical bills or car troubles means the game is always changing.

Saving money: the big picture

Everyone’s financial situation is different. As such, there’s no single way to accumulate wealth and build on your savings.

The Fed’s most recent Survey of Consumer Finances, undertaken in 2019, found that the average transaction account balance was $41,600, while the median balance for checking and savings combined was $5,300.  

Of course, the average figures may not mean much to the average saver. Instead, you can explore how much you should have in savings — or alternatively, what three to six months’ worth of expenses looks like for you.

You can do this by reviewing bank and credit card statements to figure out how much you usually spend on important bills. The important outgoings will be costs that include: 

  • Rent or mortgage payments

  • Insurance premiums

  • Debt payments

  • Groceries

  • Transportation

You don’t necessarily need to include expenses on luxuries or non-necessities like eating out or entertainment, since in an emergency — i.e., when you’ll really need to make use of your savings — you’ll more than likely be cutting down on these sorts of things anyway.  

What do interest rates look like for savings accounts?

If you’re looking to save, chances are you’ll need a savings account.

According to NerdWallet, the average savings account today earns 0.13 per cent.

So, if you saved $3,000 over a year, you’d earn just a few dollars in interest. 

However, if you put the $3,000 into a high-yield savings account that earns a 0.5 per cent annual percentage yield, it would earn more than $15 after a year.

This interest would consequently earn you interest over time, creating a saving snowball effect called compound interest. 

How compounding works can be slightly counterintuitive, to understand it better we recommend checking out our compound interest calculator and playing around with your own numbers.

How much of my salary should I be saving?

Although it’s not always possible to save a large chunk of your salary, there are plenty of experts who advise saving 20 per cent of your gross monthly income.

This may seem daunting, but options like a workplace retirement plan can help you put a monthly sum aside without it feeling like it’s hitting your disposable income.

This rule of thumb advice is naturally not applicable to everyone, but if you’re able to save some of your income each month — even if it’s 5–10%, you’ll still be making progress.  

If you’re able to figure out how much you can save, you should then decide where to put it.

We’ve already mentioned working out what six months of expenses might look like; if you haven’t already got this pot saved, then that’s the place to start.

An emergency fund is crucial to ensuring that you’re able to deal with life’s unexpected costs, like layoffs or medical bills.  

After you’ve reached a sufficient level of emergency savings, you can turn towards your retirement.

Regularly taking stock of your earnings and savings is important, as you can readjust where to allocate your spare cash.

So, for example, if you were earning $3,500 per month and were able to set aside ten per cent of that — i.e., $350, you could place $300 of that into your emergency fund, and the extra $50 into your retirement.

Even if you can’t save the rule-of-thumb 20 per cent, putting away some of your income will benefit you in the long run.  

Savings by age group

Generally, you’re likely to be earning less money when you’re younger.

Plus, as you get older, you’ll be edging closer to retirement and will potentially be making more of an effort to consolidate your long-term funds.

Unbiased recommends that you save ten times your income if you want to retire at age 67. But whatever age you are, Fidelity has developed some age-based saving milestones that are worth adhering to if your goal is a comfortable retirement.  

  • How much money should I have saved by 30? The equivalent of your annual salary saved; if you earn $50,000 per year, by your 30th birthday you should have $50,000 saved

  • How much money should I have saved by 40? Three times your income saved

  • How much money should I have saved by 50? Six times your income saved

  • How much money should I have saved by 60? Eight times your income saved 

  • How much money should I have saved by 67? Ten times your income saved. 

It’s important to remember that these guidelines also include anything you’ve saved in a retirement account, like a 401(k) or Roth IRA.

And even if you feel like you’re a way off these goals, they can still offer something to strive toward over the long term.

Getting started with your savings

If you’re at the beginning of your savings journey and are looking at the goals above with some doubts, you may be wondering where to start.

Going by Fidelity’s recommendation that you should save 15 per cent of your income from the age of 25.

But a 2020 TF Ameritrade report found that nearly two-thirds of 40-somethings have less than $100,000 in retirement savings, and 28 per cent of those in their sixties have less than $50,000.

This can be down to any number of factors, but ensuring you first have an emergency fund before beginning your retirement fund will ensure you aren’t rocked by unexpected bills.  

Turning away from the big numbers and end goals, instead you can look at saving at a granular, short-term level.

If you put just $20 each week into a high-yield savings account, you’ll be able to save around $1,000 in one year. That’s less than $3 a day in savings.    

nearly two-thirds of 40-somethings have less than $100,000 in retirement savings

How can I increase my savings?

If you don’t feel like you’re on the right financial path towards saving yourself money, Unbiased can help you prioritize and support you with a financial plan. Plus, there are other strategies that you can pursue to boost your savings.  

  • Automate your savings: Setting up automatic transfers from your checking account to your savings account means the hard part is done for you, and you may end up seeing the money that leaves your account as just another monthly bill.  

  • Raises and bonuses: If you earn yourself a raise or a bonus, why not automatically place a percentage of this into a savings account? If it never hits your checking account, you’ll never miss it.  

  • Consistently review your budget: If you keep a keen eye on your monthly expenses, you’ll be able to quickly make adjustments to ensure you’re maximizing your saving potential.  

 It’s not always easy to save, but advice from experts can help you with your financial planning.

Content writer

Kate Morgan

Kate has written for leading publications and blue chip companies over the last 20 years.