How much should I save each month? Work out your own number

If you want a quick number, the best-known starting point is to save 20% of what you take home each month. It's the savings part of the 50/30/20 rule. But that number is only a reference. The right amount for you depends on what you want to achieve, what you already have and how much is really left at the end of the month.

Working it out takes less time than you might expect. You need three things.

Step 1: find out how much you save today

Before setting a target, it helps to know where you stand. Take one month's take-home pay and subtract everything you spent. What remains is your real saving. Divide that by your income and you have your savings rate.

Here is an example with round numbers: if you take home 3,000 and spend 2,700, you save 300, or 10%.

One month can mislead, because some months include insurance, gifts or a repair. If you can, repeat the sum for the last three or six months and use the average.

Step 2: decide what you are saving for

Saving "whatever I can" rarely lasts. Saving for something specific is easier to keep up, and it also gives you the number. These are the most common goals, in a sensible order:

1. A cushion for emergencies. A common guideline is three to six months of essential expenses. If your income is irregular, it makes sense to aim for the upper end. Our guide to the emergency fund explains how to build one.
2. Expensive debt. If you are paying high interest, clearing it is usually better than saving at the same time, once you have a small cushion.
3. Goals with a date. A trip, a car, a deposit on a home.
4. The long term. Retirement and other distant goals, where time works for you.

Step 3: turn each goal into a monthly amount

For a goal with a date, the sum is simple: divide what you need by the months you have left.

Goal	Amount	Time	Per month
Emergency cushion	9,000	24 months	375
Trip	1,800	12 months	150
Car	4,500	30 months	150

In this made-up example, the three goals add up to 675 a month. On a take-home income of 3,000 that is 22.5%, a little above the 20% reference. That comparison is the useful part: it tells you whether your plans fit your income.

If the numbers don't work

If your goals add up to more than you can set aside, there are only three levers: extend the deadline, lower the amount or free up money elsewhere. None of them is a failure. Moving a 9,000 goal from 24 to 36 months brings the monthly amount down from 375 to 250.

If you can't reach 20% today, start lower. Saving 5% every month is worth more than a 20% plan you drop in March. Then go up one point whenever you can, for example when you finish paying something off or your pay goes up. That way the change is easier to absorb.

How to make it happen

What tends to work best is setting the money aside at the start of the month, not saving whatever is left at the end. Schedule a transfer at your bank to another account for the day after you get paid, and what stays in your main account is what you have to spend.

Then check each month whether you hit the number. You can do that in a spreadsheet, or with a tool that does the sum for you. In abacova, the dashboard has a Savings rate card, the share of income you keep, and a Months of cover card: how long the money in your everyday, savings and cash accounts would last at your average monthly spending. That second figure tells you directly how your cushion is doing. Transfers between your own accounts count as neither expense nor income, so setting money aside doesn't distort the numbers.

If you import your bank's transaction file, the cards reflect your own data. You can see how they work in the dashboard lesson. Abacova records your money but doesn't move it, so you make the transfer at your bank.

Review it once a year

Your number isn't permanent. Review it when your income, expenses or goals change, and at least once a year. When your cushion is complete, that money is free for the next goal.

Start with step 1: look at last month and work out your real savings rate. Everything else builds from there.