How Much Should You Save Every Month

Most of us know the importance of saving money to use for emergencies, for times when we may have to look for a new job and, ultimately, for retirement. But how much money should you save every month to achieve your financial goals? That depends on your goals and how much time you have to save money, but here are some basic guidelines to help you determine how much to set aside each month.

Saving for a rainy day

Whether the rainy day comes in the form of an emergency or other financial crisis, the best way to prepare is to start a savings account which you don’t touch for any other reason. If you want to have $10,000 set aside in your rainy day fund, here’s how much money you need to contribute based on earning two percent on your account at a three percent annual inflation rate:

To save $10,000 in three years, you’d need to put $269 a month into a savings account
To save $10,000 in five years, you’d need to put $158 a month into a savings account
To save $10,000 in ten years, you’d need to put $75 a month into a savings account

Saving for retirement

Everyone’s retirement goals are different based on the amount of social security they’ll receive, the amount of money they have invested, whether or not they own their home free and clear of a mortgage, but the general rule of thumb in saving for retirement is to start saving as early as possible.

If your goal is to have $250,000 saved by the time you reach age 65, and you earn five percent on your savings every year, here’s how much you’d need to save every month to achieve your goal:

If you start saving at age 20, you need to save $127 a month
If you start saving at age 30, you need to save $225 a month
If you start saving at age 40, you need to save $425 a month
If you start saving at age 50, you need to save $940 a month

Making sound financial plans

Of course, before you can start saving, you need to pay off any debts you currently have whether you carry balances on loans or credit cards. Simply paying off your balances will go a long way in freeing up money you can then invest and put into savings, putting you on the right track for good financial health.