How much should I save each month?

Having money set aside can give you peace of mind when unexpected circumstances arise. But how much should you be saving?

Having some money set aside can bring you long-term security and help you enjoy more of the things you love. There’s no magic number, and it depends on your individual situation.

Follow these simple rules to make sure you have enough squirrelled away for when you need it.

How much should you save?

When you’re thinking about how to save money, you need to look at your monthly income and outgoings.

One rule of thumb is to save roughly 20% of your monthly income.
This is based on the 50/30/20 rule, which recommends that:

• 50% of your income should go towards your ‘needs’ (rent/mortgage, bills, food etc.)
• 30% should go towards your ‘wants’ (socialising, holidays etc.)
• 20% should go towards saving or paying off debt

Now, 20% of your income may sound like a lot - and it is!

But remember that this is just a guide and that it includes anything that goes to ‘future you’. Any savings, pension contributions (including tax relief), debt repayments or other investments all count towards this figure.

It’s also a good idea to have an emergency fund. Consider having three to six months’ outgoings saved in an easy-access account to cover any unexpected costs, such as if you lose your job or you need to replace your washing machine.

While the above is a general guideline for healthy savings habits, if you have a specific savings goal, it’s important to take this into consideration. Think about what you’re saving for, how much it costs and when you want to buy it. Take the total cost and divide it by the number of months left before making the purchase to give you your monthly savings target.

How should I start?

Now we have an idea of how much to save, here are three simple tips to get you going:

Pay yourself first

People often find saving easier if they treat their savings just like any other bill. As soon as you’re paid, put the savings into a separate account and forget about them. That way you’re less tempted to spend the money and you’ve hit your savings target on day one, so there’s no need to worry about it.

Automate

Consider setting up a monthly standing order from your current account to your savings account. This will automatically transfer the money for you on your chosen date and build you a savings pot without you even thinking about it.

Start small

The important thing is to just start! If you’re struggling to save consistently, it may be that you’re trying to save too much. If your savings target is too big then don’t start there - save a little bit less! The most important thing is creating a lasting, regular savings habit

As with most financial goals, saving can be made much easier by taking a deep dive into your budget. Taking control and freeing up more of your money will mean you’ve got a much better chance of smashing your savings goals!

Consider paying off high-interest debt, such as credit cards or loans first as the interest you’re paying could outweigh any interest you earn on your savings.

Are you making the most of your savings?

Finding the right savings account is key to maximising your savings. This is because inflation could be eating into the interest you make on your money, meaning it’s not growing as fast as you’d like.

Take some time to choose an account that's suitable and shop around for an interest rate you are happy with.

The information provided is financial guidance and should not be considered financial advice.