How much should you save each month?
Saving a percentage of your income each month can help you grow your savings and build a safety net. How much you save each month depends on your goals and budget, but every amount you contribute—even $1 a day—will build your savings in the long run.
Ways to save money every month
Crafting a budget can help you manage your spending and find ways to save a portion of every month’s income to put toward your goals. Here’s how you can build a plan for savings into your budget:
- Income: Start by listing your sources of income and know how much comes in every month. For most people, this can change with the seasons or month to month, so think about accounting for fluctuating paychecks.
- Monthly expenses: Start with your recurring bills such as rent or mortgage, utilities and subscriptions. List the consistent costs that you have to pay every month and assign them to a category.
- Flexible spending: Decide how much you need for your flexible spending budget, which can include food and entertainment costs. These are expenses that can vary and that you can often control.
- Save what you can: Find room for savings and decide how much you can allocate, even if you adjust it month to month.
Once you have created your budget, check it often and look for more ways to save money — it’s not just about what you make, it’s about what you keep, and every dollar helps. Here is one more step to help bolster your savings strategy:
Start by saving $1 every day
Big goals start with small progress: If savings seems overwhelming, commit to putting aside one dollar every day. At the end of your month, deposit your $30 into your savings account and start the next month with the same strategy. If you find you have leftover money at the end of the month, consider adding another dollar to save $2 every day.
Different ways to save money
Set up automatic savings
Financial technology tools like an auto save feature can help grow your savings automatically in your bank account. Automation can help support building a savings habit and is an effective way to help create a safety net.
Your bank's mobile app can sometimes offer auto save features which can allow you to set rules for putting away money daily, periodically, or every time you get paid. For instance, you can set a goal that allows you to make an automatic transfer of $20 from your checking account to your savings account once per week. You can also automatically transfer a percentage of money into your savings each time you get a deposit.
Use direct deposit
If your employer offers direct deposit, they may also offer the ability to designate portions of your check to different bank accounts. If that’s the case, consider earmarking a percentage of your pay to be deposited into savings. If the money isn't in your checking account, this can help you avoid spending it.
Pro-tip: If you get a raise, consider putting the difference between your new salary and your pre-raise salary directly into savings. Since you’ve been living on your pre-raise salary, you may not notice any difference in your budget, but you may see your savings grow with a promotion.
Save extra money when you can
If you get a raise, a bonus, an IRS refund or additional income, consider depositing the extra money directly into your savings account. If it’s not feasible for you to save all of the money, consider putting a portion into your savings.
If you're paid on a bi-weekly schedule, look for months where you'll receive 3 paychecks. That “additional” monthly paycheck or a portion of it can be put directly into savings, usually without affecting your monthly budget.
Commit to daily savings
Even putting aside a dollar every day can help to build up your savings. When you start with a modest effort, you may begin to understand how to plan out a savings fund. As you find more ways to save on everyday expenses, you may be able to increase from $1 a day to $5 a day, until you have a strong savings strategy embedded into your everyday life.
Pro-tip: Your $1 a day savings plan could start today. When you're able to add $30 to your savings at the end of the month, you may want to try increasing your daily savings rate to $2 if you can afford to do so.
Why saving money matters
Build an emergency fund
Having an emergency fund can help you manage life’s unexpected expenses, like a medical bill, a blown-out tire, or home repair. When building up your savings, it’s important to consider your goals, develop a habit, and stay consistent so you can achieve it.
Achieve short-term and long-term goals
Attaching a personal goal to your savings may help motivate you to save more. Once you have built up your emergency fund, put a savings goal in place to keep your momentum going. From financial health goals like paying off credit card debt or saving to buy a home, to big-ticket items for an upcoming birthday or anniversary, goals may help you make smart financial choices whenever you spend.
Long-term goals, like paying for your children’s education or taking a trip, will take more time to realize. By starting to deposit money into your savings account early, you can accumulate money over time and be prepared when the time comes.
Prepare for big purchases
Setting a goal for savings can help build motivation and show you how small savings plans can lead to big achievements. Auto save is an option to build your “goals,” so your savings plan is tied to a specific savings objective. Whether you're saving for a new bike or a down payment on a home, knowing your dollars are dedicated to a goal can help motivate you to save and reward you with something you thought was beyond your budget.
Where should you save money?
You should consider putting away the money you save into an online savings account. Choosing a deposit account with an interest rate will allow your funds to increase over time. For example, setting aside a portion of your money into a certificate of deposit (CD) means that you’ll get a good interest rate on your savings in exchange for having your deposit locked up for a set time period.
When you should start saving money
The best time to plant a tree is 20 years ago, and the next best time is today. You can apply the same lesson to savings: build your budget for next month today so you know your income and expenses. Once your expenses have been paid, move the rest towards your savings account and make a habit of tucking your excess funds away so you can grow a savings habit into a savings fund.