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How much money should I save each month? ๐Ÿ’ท

How much money should I save each month?

How much money should I save each month? –

Introduction ๐Ÿ‘‹

These days people will always tell you to “save, save save!”๐Ÿท

But how much money do you actually need? ๐Ÿคทโ€โ™€๏ธ

How much money should you have in your savings account? ๐Ÿฆ

And how much money should you “put away” each month? ๐Ÿฟ๏ธ

Here is our step-by-step guide to working out how much money you should save! ๐Ÿ‘ฃ

Disclaimer: This website provides information for guidance and educational purposes only. The Grown-Up School does not provide regulated financial advice. You can seek independent financial advice from a suitably qualified and regulated professional advisor. Check out our disclaimer policy for more information.

How much you should save up ๐Ÿ†

The amount of money you should save each month depends on 3 things:

  1. How much money you’ve got saved now โœ…
  2. The amount you want to save up (what goals have you got?) ๐Ÿ†
  3. How much you can afford to put away after you’ve paid for all your essentials ๐Ÿท

1. How much have you got saved now? ๐Ÿท

The first step towards planning how much money to save is to understand exactly how much money you’ve got in savings now. ๐Ÿ’ฐ

You should check things like:

  • Current accounts (What is a personal current account? ๐Ÿ’ณ)
  • Savings accounts
  • Any spare cash buried around your house
  • Pension plans from work places
  • Child accounts/trust funds that your parent/guardian may have set up for you

2. What is your savings target? ๐ŸŽฏ

Once you’ve looked at how much money you’ve already got saved, it’s time to look at where you need to get to. ๐Ÿ›ฃ๏ธ

Your overall savings target should be made up of 3 things:

  1. Emergency savings ๐Ÿš‘
  2. Personal goal savings ๐Ÿช…
  3. Retirement savings ๐Ÿง“

Emergencies ๐Ÿš‘

Financial emergencies are a lot more common than you think. ๐Ÿ”ฅ๐Ÿš’

One minute your bank account seems full – the next you find yourself needing money for things like:

  • Unexpected bills ๐Ÿงพ
  • Car repairs ๐Ÿš—
  • Pet veterinary bills ๐Ÿถ
  • Increased shop prices ๐Ÿท๏ธ
  • Phone repairs ๐Ÿ“ฑ
  • Broken fridges/freezers/washing machines ๐Ÿ”ง
  • Home repairs ๐Ÿก

Not only are these events really stressful

It makes it so much worse when you have to worry about scraping the money together to cover those costs. ๐Ÿ˜Ÿ๐Ÿ’ธ

Having an emergency fund is probably the most important step towards getting in control of your finances. ๐Ÿ‘ฃ

Having a pile of savings set aside gives you: ๐Ÿ—ป๐Ÿ’ฐ

  • lower likelihood that you need to borrow money in an emergency ๐Ÿ’ณ๐Ÿงฏ
  • peace of mind knowing that you have something in the bank to cover you ๐Ÿง˜โ˜”

Emergency savings give you a great safety net. ๐Ÿฅ…

I mean who here wants to lie awake at night, worrying about their washing machine breaking? ๐Ÿค”๐Ÿ’ญ๐Ÿงฝ

Whilst this is a really important step – it isn’t easy. It takes a lot of patience, work, and self-control to build up emergency savings ๐Ÿง—โ€โ™€๏ธ

How much money should I save for emergencies?๐Ÿ’ธ

The 3 month rule 3๏ธโƒฃ๐Ÿ“†

Some financial experts recommend that you need at least 3 months’ worth of your typical income saved away for emergencies.

This means that if you make ยฃ2,000 a month, some experts think that you should have ยฃ6,000 saved away for emergencies. ๐Ÿ’ฐ

This means that if you lost your job or income, you would have 3 months to fix it before it becomes a bigger problem! ๐Ÿ› ๏ธ

If your job or income is less stable, (e.g. if you run your own business!) you may want to consider saving more e.g. 6 months’ worth of income for peace of mind. โš–๏ธ

Did you know?

In June 2021, Yorkshire Building Society found that 1 in 5 UK adults have less than ยฃ100 in savings.

If you have less than ยฃ100 in savings, it’s a great time to start saving! ๐Ÿฝ

Save regularly

Try to commit to saving a regular amount every month for emergencies. ๐Ÿ“†

If it’s a struggle to get money saved quickly, saving 10% of your income might be an easier start. –

For example – if you make ยฃ2,000 a month, according to the “3 month rule” your target should be ยฃ6,000 in emergency savings.

You could save 10% (ยฃ200 a month), and reach your ยฃ6,000 emergency savings goal in 2.5 years. ๐Ÿชœ

Having an emergency fund can help you to feel more prepared for the future and financially comfortable.

It could be a good idea to keep your emergency savings in an easy to access, separate savings account, to avoid accidentally spending them. ๐Ÿฆ๐Ÿ’ธ

Personal goals ๐Ÿช…

Next, think about what your personal goals are that you’d need to save for.

How much would they all cost? ๐Ÿ’ณ

You might want to save towards things like:

  • Moving into your own home ๐Ÿšš
  • Decorating a home ๐Ÿ–ผ๏ธ
  • Buying a house ๐Ÿก
  • Getting a car ๐Ÿš—
  • Having children ๐Ÿ‘ถ
  • Saving for a wedding ๐Ÿ‘ฐ
  • Holidays ๐Ÿ–๏ธ
  • Parties ๐Ÿฅณ
  • Event tickets ๐ŸŽซ
  • Getting a pet (vets bills aren’t cheap too!) ๐Ÿ•
  • Large purchases ๐Ÿ’ธ

Do some detailed research to work out how much they’re going to cost in total, then add it to your total savings goal! ๐Ÿ•ต๏ธโ€โ™€๏ธ

Retirement ๐Ÿง“

It might seem AGES away, but the earlier you start to think about getting older and quitting work the better. ๐Ÿ’ฐ

This is because:

  • The earlier/younger you start, the more time your money has to grow, meaning the more rich your retired self will likely be๐Ÿชด๐Ÿ˜Ž
  • People can make a lot of money from retirement plans– would you rather be older with a chance of getting rich, or potentially never rich at all? ๐Ÿค”๐Ÿ’ธ
  • Money from the government (state pension) isn’t enough for a lot of people to live comfortably – planning your retirement and investing in pension schemes can help you to control how comfortable you want to be. ๐Ÿ–๏ธ (state pension and pension schemes explained below!)
  • A lot of people don’t think about retirement planning for many years, by the time they start thinking about it, they’re too old for their money to make a big difference, and regret it when they get older ๐Ÿง“๐Ÿ˜ญ
  • A lot of workplaces offer a large amount of money in free pension contributions – who really wants to miss out on free money? ๐Ÿ’ธ๐Ÿค‘

Make sure that your savings goals consider retirement! ๐Ÿ†

Think about pensions ๐Ÿง 

In the UK, there are 2 main types of pension:

State pension ๐Ÿ›๏ธ

This is money that you can claim from the government at “pension age” (66-68 years old depending on when you were born). ๐Ÿง“

You get this money after paying “national insurance tax” to the government when you work. ๐Ÿ’ผ

You need to pay towards “national insurance” for 35 years to get the full state pension money from the government. ๐Ÿ—๏ธ

In 2021/22 people can get up to ยฃ179.60 per week as their state pension.

For a lot of people this isn’t enough money to comfortably live off when they retire, which is why they invest in pension schemes/workplace pensions (see below)|โฌ‡๏ธโฌ‡๏ธ

Pension schemes/workplace pensions ๐Ÿ’ผ

Pension schemes are a type of long-term savings plan. ๐Ÿท

You save some of your money regularly whilst you’re working. ๐ŸŒฑ

This gives you money to live off in later life, when you want to work less or retire. ๐ŸŒณ

There are different types of pension schemes

Some might be set up by your employer, others you can set up by yourself. ๐Ÿ™‹โ€โ™€๏ธ

If your employer sets up a pension for you this is called a workplace pension. ๐Ÿ’ผ

A lot of workplaces offer free pension contributions, depending how much you put in. ๐Ÿ’ธ

For example, if you pay 8% of your salary into your pension savings, your employer might double that, meaning every year an amount equal to 16% of your salary is going towards retirement. ๐Ÿ’ธ๐Ÿ’ธ๐Ÿ’ธ

How cool is that? ๐Ÿ˜ฒ

That could be a crazy amount of free money from your employer, which might grow over time with your pension investments ๐Ÿค‘๐Ÿชด

Why pensions are important โœ…

It is important to consider investing in pensions because they:

  • give you a steady income for the rest of your life ๐ŸŒ‡
  • help to make sure that your family is taken care of financially ๐Ÿ‘ช
  • give you security and peace of mind when you’re retired ๐Ÿง˜
  • help you build wealth over time (people can make a lot of money from pension investments!) ๐Ÿ“ˆ

3. How much can you afford to put away after you’ve paid for essentials? ๐Ÿ’ฐ

By now you should know:

  • How much money in savings you’ve already got ๐Ÿท
  • How much money you need saved ๐Ÿ†
  • The amount you need to save on top of your existing savings, to reach your total savings goal ๐Ÿชœ

Next, you need to work out how much you can afford to save towards your goal each month.

Create a budget โœ๏ธ

Budget = a financial plan.

In our “How to keep control of your money ๐Ÿ’ธ” article we explain that the trick to always having enough money is to:

โ€œMake a good amount of money โ€“ spend as little of it as possible.โ€ ๐Ÿ’ฐ

If you create a budget, you can keep an eye on:

  • how much money you make ๐Ÿ’ฐ
  • how much you spend ๐Ÿ’ณ
  • where you can increase your income ๐Ÿ“ˆ
  • what you spend money on ๐Ÿ›๏ธ
  • where you can save money ๐Ÿ“‰

It doesn’t have to be fancy, it can be as simple as asking yourself these 4 questions

1. How do I make money? How much do I make? ๐Ÿช™

Write down all of the ways that you make money and how much you make every month.

Maybe use online banking or try out a financial tracker app to help you track your income?

2. How do I spend money? How much do I spend? ๐Ÿ’ณ

Write down all of the ways that you spend money and how much you spend every month. It can be very easy to underestimate how much money you spend so be as accurate as possible!

Even small purchases quickly add up.

Maybe use online banking or try out a financial tracker app to help you track your spending?

3. Do I bring in enough money to reach my goals? How can I increase my income? ๐Ÿชœ

If you think that you’re not making enough money and can make more, write down some ideas to increase your income.

4. Do I spend more money than I earn? Do I spend more money than I need to? How can I reduce my spending? ๐Ÿ›๏ธ

If you think that you’re spending too much money and can spend less, write down some ideas to reduce your expenditure.

The 50/30/20 rule ๐Ÿฐ

One way to work out how much you can put aside for savings is the 50/30/20 rule.

With the 50/30/20 rule, you structure your budget so that you set aside:

  • 50% of the money you make for essentials ๐Ÿฅฆ
  • 30% of the money you make for your “wants” ๐Ÿคฉ
  • 20% of the money you make for your savings ๐Ÿท

50% for essentials ๐Ÿฅฆ

According to the 50/30/20 rule, the first 50% of your income should be set aside for essential things like:

30% for wants ๐Ÿคฉ

The next 30% of your income, is for things that you want (but don’t need!)

It can include things like your:

  • Monthly subscriptions ๐Ÿ“บ
  • Travel โœˆ๏ธ
  • Entertainment ๐Ÿ’ƒ
  • Meals out ๐Ÿ•

20% for savings ๐Ÿท

The final 20% of your income is for your savings goals.

This can include things like:

Example breakdown

So – for example, if you earned ยฃ2,000 per month, your budget could be as follows:

  • 50% = ยฃ1,000 to cover essentials e.g. rent, food, insurance
  • 30% = ยฃ600 to cover wants e.g. meals out, entertainment, holidays
  • 20% = ยฃ400 for savings e.g. building up emergency savings

Once you’ve worked out your 50/30/20 budget, you can set up automatic monthly payments to move your savings somewhere separate from your needs/wants money. ๐Ÿ”

This can make it easier to keep track of your savings, but also help avoid the temptation of spending your money! ๐Ÿ’ณ

But I can’t afford my goals, what should I do? ๐Ÿคทโ€โ™€๏ธ

When you look at your money left over for savings, you might notice that it’ll take a VERY long time to reach some of your goals.

If you can save ยฃ100 a month it’ll take you:

  • 6 months to save ยฃ600
  • 1 year to save ยฃ1,200
  • 1.5 years to save ยฃ1,800
  • 2 years to save ยฃ2,400
  • 3 years to save ยฃ3,600
  • 4 years to save ยฃ4,800
  • 5 years to save ยฃ6,000

If you have a bank account that pays you interest (What is interest? (easy explanation) ๐Ÿ“ˆ), your savings can grow more quickly, but saving can still be slow and difficult!

If you can’t afford your goals, there are several things you can do to help:

Change your goals ๐Ÿ†

One way to make your goals affordable, is to change them to things that are affordable!

Do you really need a brand new sports car, or would just a car do? ๐ŸŽ๏ธ

Would having a staycation holiday be good enough, instead of going abroad? ๐Ÿก

Think about the cheapest way you can still achieve the goal, without it feeling like too much of a compromise.

Earn more ๐Ÿ“ˆ

If you don’t want to change your goals, it might be worth considering how you can earn more money to help achieve them!

Check out our articles below for some of our best ideas for earning more money.

15 quick and easy ways to make extra money ๐Ÿซฐ

How to ask for a pay rise ๐Ÿ’ธ

4 really important times to ask for a pay rise โŒš

Why you should care about the interest rate on your savings account ๐Ÿท

Spend less ๐Ÿ“‰

If you don’t want to change your goals, it might be worth considering how you can spend less money to help achieve them!

Check out our articles below for some of our best ideas for spending less money.

200+ ideas to save money ๐Ÿ’ฐ

How to keep control of your money ๐Ÿ’ธ

14 money-related red flags to look for in relationships ๐Ÿšฉ

Create a longer timeline for saving โŒ›

If you’re keen to reach your savings goals quickly, it might seem like your goal is unaffordable when you set tight deadlines like 6 months or 1 year.

Instead, why not create a longer timeline to reach those goals? ๐Ÿ“

Conclusion ๐Ÿ‘

So that’s it!

To work out how much money you should save each month, you should:

  1. Check how much you’ve got saved now๐Ÿท
  2. Work out your savings target๐ŸŽฏ
  3. Calculate how much you can afford to put away after youโ€™ve paid for essentials๐Ÿ’ฐ

If you know any friends or family members who might benefit from learning about how much money to save each month, share this post with them!

Finally, don’t forget to check out our similar articles below!

Similar articles to “How much money should I save each month?” โฌ‡๏ธ

4 money myths you shouldnโ€™t believe ๐Ÿฆ„

Why you should save for retirement when youโ€™re really young ๐Ÿง“

8 reasons to start saving money now ๐Ÿท

200+ ideas to save money ๐Ÿ’ฐ

Is borrowing money a bad thing? ๐Ÿคทโ€โ™€๏ธ

8 bad money habits you should break๐Ÿ’ฐ

How do banks work? ๐Ÿฆ


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