CALL: 0333 577 5000

How Much Should You Save Every Month?

27.11.2020 by Adam F


Everyone knows that saving is important, both in the short term and for the future. However, that doesn’t make the process of saving any less difficult.

Whether you're struggling just to pay all your bills every month or you are finding it difficult to stop spending and start saving, it's important to know not only how much you should be putting aside every month, but also why.

Think about it. If you have to immediately lock-away some of your hard-earned cash immediately after payday each and every month, don’t you want to know what it’s going to be for? Of course, you do!

And no, it shouldn’t be just because of some elusive notion that everyone should be saving.

That’s why in the below article, you will find out the question to, “how much should you save each month?” but also why you need to save this amount and where you should save it.

In a nutshell, we've put together a short, but complete guide to savings.

Let's get started!

What are you saving for?

Before you find out exactly how much you should save each month based on your income, it can first be a good idea to determine what you are saving for, or what are your saving goals?

Although this will be slightly different for everyone, there are several key reasons why you should be saving money:

To pay off debt

Most households have debt, even if it is just their mortgage. Yet debt can stop you from achieving financial freedom and should be paid off as soon as possible. In the short term, if you have credit card debt, loans, or you have got stuck using your overdraft every month, savings can help you to pay off these debts quickly and effectively and without having to suffer high-interest rates.


Now more than ever, it is crucial that households are able to continue paying their bills if the worst does happen and you lose your job. In fact, it is recommended that each household has between 3-6 month’s income put aside to cover the cost of their mortgage, rent, and bills during periods of unemployment.


This stage of your life may seem a long way off but did you know that you should start saving for your retirement in your 20s? In fact, the earlier, the better as, the longer you leave it to start putting money aside for your retirement, the more you are going to have to save each month to be able to enjoy a good quality of life once you stop working.

Buying your own home

If you are currently renting but would like to own your own home one day, you are most likely saving for a deposit. Although, of course, this is important, don’t let it overshadow all the other crucial elements that you need to save for.


Whether for yourself, your partner, or for your children when they are older, saving for education is always a good idea. This is especially true if you are not happy with your current employment and would like the opportunity to better yourself and improve your career prospects in the future.

Home repairs or improvements

Even if you are content with your home now, that doesn’t mean that you won’t need to spend money on it in the future. Whether to repair a leaking roof, install triple glazing or even extend your property, paying for home repairs and improvements with savings is a much more attractive option than re-mortgaging or taking out a home improvement loan.

Unexpected emergencies

Savings are ideal for paying for unforeseen expenses that otherwise would have had to be paid for by taking on more debt. This could be for dental emergencies, a broken boiler, or problems with your car. Whatever it is, having an emergency savings fund is essential and can help you avoid struggling to make ends meet due to an unexpected emergency.

If you do find yourself in an unexpected emergency and don't have enough savings, then a short term loan might be a suitable option. The important thing is making sure you do enough research to ensure the loan you take out is the right one for you. An increasingly popular option is taking cash out against some of your major assets. For example, a new logbook loan allows let you to borrow cash against the value of your car.

The important thing is that you do this as part of your budget and that you can afford to make the repayments. As long as you can, then a loan can help you get through these unexpected emergencies and leave you in a better position to pay off the debt in the future.

How much should I save each month?

According to recent research, an estimated 40% of people in the UK do not have enough savings to support themselves for a month in the absence of income, with 15% having no savings at all!

As you would expect, older people have more savings than their younger counterparts, and those with a higher income have also put more aside than those who earn a smaller wage.

That being said, whatever your age or income, there is an optimal amount that you should be aiming to save every month.

Have you heard of the 50/30/20 rule?

If not, this refers to how you should be spending your total monthly net income:

  • 50% should go on your monthly essential expenditures such as your mortgage, rent, bills, and food.
  • 30% should be used for discretionary spending.
  • 20% should be saved.

However, given the current economic climate and the current cost of living, the above advice can be somewhat difficult to adhere to. For instance, how many families do you know that spend more than 50% of their income on their rent and bills? Probably quite a few. Especially in one-income households.

Therefore, if you are currently spending say 60% or even more of your wage on essentials, how can you possibly hope to save 20%?

You can’t. It’s that simple.

However, that doesn’t mean that you can’t save at all. You just need to be smarter in terms of your savings, which leads us to the next part of this money-saving guide:

Where should you be saving?

Whether you have 20%, 10%, or 5% of your monthly income to save, it is vital that you choose wisely when it comes to savings accounts. You also need to ensure that you think about both short and long-term savings.

Reasons for having short term savings include:

  • Paying for a holiday
  • Purchasing a new phone or TV
  • A deposit for a house

Reasons for having long term savings include:

  • Contributing to your pension
  • Topping up your retirement fund
  • Paying for your children’s university fees

There are several different types of ways that you can save your money, and each one has its own individual merits.

Current accounts

Although bank accounts used to offer less attractive interest rates than savings accounts, this is not necessarily always the case anymore. In fact, you can find several bank accounts that pay better interest than ones that are specifically for savings.

If your current bank account does not offer good rates, why not look into switching accounts or even changing your bank?

Regular savings accounts

If you have a small amount of money to save each month, a regular savings account could be the right choice for you. That being said, you should always check that you are getting the best interest rate that is available to you on the market and that you move your savings if this rate changes.


ISAs, or individual savings accounts, are a great way to save money in the long-term, allowing you to put aside a fixed amount of money each year without having to pay tax on your interest.

You can choose between a fixed-rate cash ISA, which means you can access your money if you need to, but you will lose some of your accrued interest in penalties, or an easy-cash access ISA, which is preferable for those who want access to their cash when they need it but don’t want to have to pay withdrawal fees.

Currently, you can save up to £20,000 in an individual case ISA each year.


If you want to build wealth over the long-term and ensure that you can retire in comfort, you need to think about investing. One of the main benefits of investing over cash savings is that your potential returns can be significantly higher. That being said, investments should always be seen as a long-term way to make money as your chosen investments can fluctuate.

Whether you choose to invest in stocks, bonds, funds, or property, make sure you choose a level of risk that you are comfortable with and if in doubt, seek the help of a professional financial advisor.

When shouldn’t you be saving?

If you are currently paying 20% of your monthly income into a savings account, but you are only paying the minimum monthly repayments on any debts you have, then you are more than likely losing money on a monthly basis.

Why is this?

It’s simple. If the interest you are earning on your savings is less than the money you are paying out in interest on your debts, then you will be worse off at the end of every month.

Therefore, although you will still want to gradually try and accumulate an emergency savings fund, you should focus your efforts on paying off your debts first, and in particular, your highest interest debts.

When it comes to saving money, it can be all too easy to compare yourself to others and try and emulate their savings plans. However, your best chance of success comes by focusing on your own personal financial goals and working out a budget that is both manageable and sustainable for you and your family.