There’s no right way to save, but one thing’s for sure - you should be saving money each month.
But the question is, how much? If you’re earning a consistent income and have savings goals for the future, you need to save a regular amount each month. The more you save, the quicker you’ll achieve your financial goals.
Saving regularly each month is important for a healthy financial future. It can be tough to start, but making saving a habit will greatly impact your long-term goals and financial well-being.
Here, we cover how much you should save each month, which factors impact your savings, and tips on how to save more.
How much of your income should you save each month?
From the start, it’s important to highlight that everyone is different. The question of how much should you save a month in the UK will vary depending on your income, outgoings, savings goals, and priorities.
For example, a family with a mortgage and two children will need to be more cautious with their savings than a teenager saving for a holiday or a new phone. That doesn’t mean saving each month is less important for some than others; it’s just different depending on circumstances.
So, what is a good savings amount? It’s recommended that you should save around 20% of your income each month. This figure is based on following the popular 50/30/20 budgeting rule[SY1] . You budget 50% of your income for needs, 30% for wants and 20% should be saved. This is a general rule of thumb recommended by most experts that helps to split your income simply and easily. When figuring out how much you could save, ask yourself:
· What are you saving for?
· What is your saving timeline?
· How much can you save realistically?
· How much of your income is used for essential spending? Housing, travel, food, insurance, and loan payments.
· Could you streamline your spending to save more? Remove subscriptions, eat out less, and work out at home.
Factors that can impact the amount you can save each month
The general guideline of saving 20% of your income doesn’t work for everyone. There are many reasons why people will want to save, and it can change each month. Life happens, and that’s why you need a healthy savings account. Car repairs, boiler breakdowns and medical emergencies are all examples of unexpected expenses that can drain your income if you don’t have savings.
We hate to break it to you, but no one ever said saving would be fun, but it is the responsible thing to do. The bottom line is that you need to save money each month to be financially stable.
Here are some factors that impact the amount you save each month:
● Financial goals - If you have a large financial goal, such as buying a house or retirement, you may need to save more each month to reach it.
● Income – The more you earn each month, the more disposable income you will have and, therefore, more money available to save after your essential costs are taken care of.
● If you have debt such as loan payments, hire purchase agreements and credit card debt, you may have less to save as you pay off these debts. Paying off debt is important and should be a crucial part of your monthly budget.
● Expenses – It's simple, the more you spend, the less you save. There are unavoidable costs such as rent, travel, food and utility bills, but could you shop around for a better deal?
● Unnecessary spending – After your essential costs are taken care of, you now have an amount to split between spending and saving. Check your bank statement carefully and highlight unnecessary spending.
For example, if you spend £4.00 on takeaway coffee five days a week, you spend £80 per month on coffee. This £80 per month could be put towards your savings without spending any more of your income just by making the small sacrifice of making coffee at home. (Yes, we know it’s not the same but work with us here.)
What is a good savings amount to have?
If you were to lose your job tomorrow, how long could you survive on your money right now? If you don’t want to share the answer with the group, chances are you don’t have enough savings.
As a rule of thumb, it’s recommended to have enough money saved to cover your expenses for at least three months. This should be enough to cover all your essential expenses. Having a good amount saved will mean you can still afford to live for a while if the worst were to happen, such as a medical emergency or if you lose your job.
Three months should be enough time to get things sorted or get a new job. Three months’ worth of savings is a way to bridge the gap. With a good savings amount, you will have a financial cushion to soften the landing of any unexpected costs.
It’s also about balance. Be careful not to leave yourself short because you have saved too much and remember to budget for fun things too. You work hard for your money and should budget some of your income to do activities you enjoy.
How to save money every month?
Most people’s attitude towards money varies between ‘You only live once’ and ‘I should really save this money’ regularly. That’s normal. It’s also why budgeting and saving are so important. Saving each month will remove the stress and worry of saving and ensures you have money for a rainy day, and allows you a treat for yourself once in a while.
To help you get started with saving each month, we have prepared a list of helpful tips that will help them to start saving regularly:
7 Tips on how to start saving money regularly:
The key to saving is consistency. It doesn’t have to be a considerable amount of money, but it does need to be regular. Here are seven tips to help you become an everyday saver:
- Build the habit of saving - If you're unsure how much you should save each month, start with a small amount and gradually increase it over time. If you have spare money left at the end of each month, you can top up your savings too.
- Set a savings goal – When you know your goal, you will be more motivated to achieve it.
- Automate your savings – You can set up a direct debit to go into your savings account on a set date each month, so you won’t forget to save. Transfer your set amount on payday each month, and your savings will grow without realising.
- Save now, pay later – If you save money now, you can pay for what you need later. Take advantage of interest-free offers, and hold monthly to pay when you need to.
- Reflect and amend – your savings goals will change. If you have a busy month of social events or birthdays, you may save less, and that’s OK. Just be mindful of your savings in the months leading to and after your busy times.
- Accountability partner – Join up with a partner, family member or friend to help you both save more. You can make each other accountable for your spending and saving. You could spend time together doing free activities or plan fun evenings at home. Having someone to support you on your saving journey can be easier.
- Saving challenge – Saving a certain amount by a specific date? Challenge accepted. We have some great ideas to help you start a savings challenge here[SY2] . You can ask friends and family to join in so you can support each other to save more each month.
We take back what we said earlier; saving can be fun with our digital jam jars. HyperJar can help you become a better saver and reach your financial goals. You can rename your jars, whatever you want and watch them fill up as you save each month.
How much should you save a month is entirely up to you. Your savings goals have to work for you. Think about what you want to save for and why you’re doing it. By regularly saving each month, you can build your savings to pay for your next holiday, a house deposit, or to keep for emergencies.
The sense of achievement when you finally reach your goal is the best feeling! And you don’t have to stop there. Your saving goal is a target, not a ceiling. Keep saving for a stable financial future and a well-funded savings pot to keep money worries at bay.