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How Much Should I Have in Savings?

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April 27, 2021

We all have goals set in mind for our lives. Whether your goal is to move to your dream city at 25, buy a new car at 30, or retire at 65, each one requires a certain level of funding. For many, this is an intimidating thought!

Your savings account is the backbone of your financial security. Once you pay off debts and begin working steadily, it’s important to build up your savings account.But how much money should you save?

This guide breaks down how much money you should save for different circumstances and how to do it.

50/30/20 rule

A good rule of thumb to begin with when saving money is the 50/30/20 rule. This rule is a simple budget outline that breaks up your earned income. Each number represents a percentage of your income that goes to various financial needs.

For instance, 50% of your earned income should go to paying off your necessary expenses. These include rent, food, water, electricity, and other fixed needs that you pay for each month.

The next number represents the 30% of your income you can put toward variable expenses or things you want. However, as an adult, wants tend to look more like replacing dishwashers than buying the new Xbox game.

Lastly, the 20% represents how much of your earned income should go toward your savings account.

While the 50/30/20 budgeting rule is a great place to start, the amount you need to be putting toward your savings varies depending on your circumstances, how much debt you’re in, and how fast you want to save. Try using a budget planning calculator to help you figure out how much you should put in each of these categories.

Before we talk about different financial scenarios to save for, let’s talk about debt.


Debt isn’t fun for anyone. If you have student loans to pay off or credit card debt racking up, it can be overwhelming to see the light in the tunnel and feel like you’re in control of your money. For this reason, it’s important to attack debt head-on before you start saving for your goals.

When starting to pay off debt, it’s generally recommended to keep $1,000 in your savings as an emergency fund if an unexpected expense or emergency comes up. Other than this amount, any leftover money you earn should go towards paying off debts.

To visualize it with the 50/30/20 rule, it may look like this.

  • You have $1,000 in an emergency fund.
  • You pay 50% of your income to fixed expenses (needs).
  • You pay 30% of your income to variable expenses (wants).
  • You pay the remaining 20% of your income to attack debt.

If you want to crack down faster, consider eliminating some of your variable expenses. If you have debt racked up, it may be worth it to skip the cup of coffee on the way to work or even make long-term changes like riding a bike if you can or carpooling.

There are tons of ways to save money and manage it well so you can save faster.

Saving for an emergency fund 

One of the most important things to save for when you first begin consistently earning money and paying bills is an emergency fund.

An emergency fund is a fund for unforeseen expenses. These don’t technically have to be medical bills or “emergency” scenarios. This fund could be to pay for something as ordinary as your car breaking down, losing your laptop, replacing your phone, or even paying unexpected taxes or bills.

The logic behind having an emergency fund is simple. We don’t know what’s going to happen. By having an emergency fund, we are better prepared to handle what might happen and keep us out of debt!

>>READ MORE: 22 unexpected reasons you need savings

Saving for retirement 

After you have an emergency fund of $1,000 and all your debt is paid off, you can start saving for retirement! Experts recommend saving 10-15% of your earned income for retirement. If you’re employed full-time, your employer likely matches your retirement fund. This means if you put 5% of your earned income into retirement, your employer matches this 5% for a total of 10%.

Why should you save for retirement now?

You’re young. Maybe you’ve just started your career. You’re making money and excited about spending it. So, why do you have to save for something that’s over 40 years away?

Good question! Retirement funds are bank accounts you get access to once you retire. This is typically around 65, though some retire sooner or later. These funds help pay for your living expenses when you’re no longer working. 

Retirement funds generally run on compound interest. Compound interest can be a great way to turn a small amount of money into a large amount of money. It can also make a huge difference when you start saving!

For example, someone who begins investing $5,000 each year at age 22 will have over $1 million by age 67 when they want to retire. Another person investing the same amount per year but starting at 32 will only have half of that amount saved. So, when’s the best time to start saving for retirement? Right now!

Saving for your own goals 

Once you’ve set up a plan to put money toward an emergency fund, pay off debts, and grow your retirement savings, you can now think about other savings goals. There are two different ways to think about this: short-term goals and long-term goals.

Short-term goals

Short-term goals are things you want in the next couple of years. For instance, if you want to replace your dining room table, get a new bed frame, or buy your partner a birthday gift, these are short-term goals that you can save for. This may also look like saving for a dream vacation with friends, funding your dream wedding, or saving to buy a new computer or television you’ve wanted.

Long-term goals

Long-term goals are things you want in the next decade or longer. This could look like buying a new car, putting a down payment on a house, or starting your own small business. Whatever these are for you, your long-term goals should be at least a decade out.

Tips for saving money 

Once you have an emergency fund, your debt is paid off, and have started saving for retirement and other financial goals, you are on the right track to being financially secure! However, there still may be times where you feel you’re not saving enough. Thankfully, there are tons of resources to help you save money on your regular household bills and add more to your savings account!

Saving on car insurance

Car insurance can be a hefty expense, but it’s necessary. Luckily, there are ways to save money on your car insurance payments.

Shop around. When you’re looking for car insurance providers, you don’t have to settle and commit to the first insurance company you see. Explore your options and get an idea of which coverage is offered for someone with your budget and history. You can then make a decision about which insurance is best.

Ask for discounts. While you’re exploring different insurance companies, ask what kind of discounts they offer and if you qualify. Many companies offer discounts, but don’t advertise them upfront, so don’t hesitate to ask your insurance agent about discounts to lower your costs.

Saving on home insurance

Your home is your largest asset, so it’s important to protect it with insurance. Like with car insurance, one way to save on home insurance is to look for discounts! There are discounts for bundling home insurance with another insurance policy, installing security systems, and even for paying your annual premium upfront. To learn more, ask your home insurance agent which discounts apply to you.

Saving on your cell phone plan

The best way to save on your cell phone plan is to avoid paying for data you don’t use. When you understand how much data you need for the activities you do on your phone, you can save money and avoid paying for something you don’t even need!

Other tips for saving money

If you really want to crack down on your spending, consider buying used. Used furniture, clothing, and other goods can be in great condition and less than half of the original price! If you’re looking to furnish your new apartment or update your wardrobe, you don’t have to spend hundreds at big box or brand name stores. Buying used is a great way to save money while still getting what you need!


If you haven’t started saving yet, you’re not alone. An estimated 20% of Americans don’t save any of their money due to debt or high expenses. So, don’t be discouraged! By using these principles to determine when to start saving, how much to save, and where to put your savings, you can get on the right track to financial security!!

And remember—the best time to start is right now!

>>SAVE NOW: Learn more about saving on your household bills