How much should I save each month?

Authored by Paula Pant

When someone asks how much money they should save each month, I throw them a curveball reply:

"What are your savings goals"?

That's a serious question. Your ideal savings rate depends on your specific, long-term reasons for saving.

There are three timelines you should consider:

Less than 1 year

Your short-term savings can get used to vacation in Aruba, buy holiday gifts or pay your taxes.

Less than 1 decade

You might use this money to replace your dishwasher, fix your car's timing belt, cover a major insurance deductible, stay afloat when you're between jobs and make a down payment on a home.


Retirement is the ultimate long-term savings goal.

Now back to the original question: How much should you save a month? Let's break this down by goal:

1. Retirement

You should consider saving 10 - 15% of your income for retirement. Sound daunting? Don't worry: your employer match, if you have one, counts. If you save 5% of your income and your boss matches another 5%, you've accomplished a 10% savings rate. Our online tools can help you calculate your needs for retirement and other financial goals.

2. Emergencies

You should also consider establishing an "emergency fund" that can cover 3-9 months of your living expenses.

How can you save such a large sum? First, calculate your monthly cost-of-living. Assume that if you lose your job, you'll sacrifice luxuries such as pedicures or your premium cable TV package. How much do you need to survive?

Divide that number in half. Can you save this monthly? If so, you'll build a six-month emergency fund within the next year.

3. Everything else

Make a list of major expenses within the next decade, ranging from replacing your gutters to throwing your wedding. (If it's easier, list broad categories like "home repairs," "holidays" and "wedding.")

Write your ideal savings goal target and deadline. Divide by the number of months remaining to see how much you should save. Want to pay cash for a $10,000 car in five years? You'll need $167 per month.

When you run through this exercise, you'll probably discover that you can't save enough for every savings goal on your list. You now have four options:

  • Re-imagine your savings goals
  • Lengthen your timeline
  • Cut your current spending
  • Earn more

Most people opt for a combination of those four choices. You might decide you'd be happy buying a $7,000 car, which will require only $116 per month. You cut your $50 cable bill and pick up a babysitting gig one night per month, and voila — now you're on-track to pay cash for your next car.

50/30/20 rule

Did you want a simpler answer? No problem. Here's a final rule of thumb you can consider: at least 20% of your income should go towards savings. More is fine; less may mean saving longer.

At least 20% of your income should go towards savings.

Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.

If you want to optimize your savings, run through the exercise described above.

Paula Pant

Paula Pant is a personal finance journalist who has been featured on MSN Money, Bankrate, Marketplace Money, AARP Bulletin, and more.

TIAA has sponsored this post for information purposes only. Paula Pant is not affiliated with TIAA, and TIAA makes no representations regarding the accuracy or completeness of any information on this post or otherwise made available by her. Ms. Pant's statements are solely her own and are not endorsed or recommended by TIAA.

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This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor's own objectives and circumstances.