What Percentage of Income Should I Save?

February 25, 2020 · 10 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

What Percentage of Income Should I Save?

Putting a portion of every paycheck into savings can be an important step toward building financial security.

Parents, financial professionals, and TV pundits like to press that point when they talk about setting lifetime goals, but it’s actually kind of a no-brainer.

Over time, the money you accumulate can help you pay for what you need (a down payment on a home, a car, and eventually retirement income) and what you want (vacations, new furniture, or a college fund for your kids).

But how do you know how much you should be saving every month? If your income, expenses, and goals are different from everyone else’s, how do you determine that number? Is $100 a month enough? Or should it be 10 times that amount?

If you’ve been wondering how much money you should save, the answer is … it depends.

Rather than starting with a random dollar amount, it may be helpful to think in terms of a reasonable but consistent percentage of your take-home pay instead.

That’s one of the takeaways from the 50/30/20 budgeting plan made popular by Sen. Elizabeth Warren and her daughter, Amelia Warren Tyagi. It suggests savers should put 50% of their after-tax paychecks toward essentials like rent and food, 30% toward discretionary spending, and 20% toward savings.

So, someone who takes home $1,350 every two weeks might put $540 a month into savings.

That’s just a guideline for getting started, though, so don’t panic if putting 20% into savings seems impossible right now. You can start at 10% or bump it up to 30% or more.

Those amounts can shift so you can make your plan work—especially if you have debts like high-interest credit cards, medical bills, or loans that need to be addressed first.

Here are some other points to consider when deciding how much of your income you should save.

It All Starts With a Budget

Ack. The b-word. Budgeting may be boring, but sticking to a realistic spending plan can make or break a savings plan.

By prioritizing monthly expenses—from keeping a roof over your head to gassing up the car to indulging in a frozen yogurt (or a frozen margarita) every Friday—you may be able to avoid impulse spending and hold on to more of your hard-earned dollars.

You can track your spending manually with a notebook or spreadsheets, or keep the data in the palm of your hand with an app like SoFi Relay, where you can see your expenses, savings, and earnings all in one place whenever you want to take a peek.

The Term “Savings” Can Apply to Long- and Short-Term Goals

Once you determine what percentage you’ll be able to save from your salary, you may want to break down that amount even further, into separate designated “buckets” or sub-accounts for different goals, which could include things like:

An Emergency Fund

An emergency fund has the potential to turn life’s potholes into speed bumps.

It’s money you can use to pay for unexpected expenses, such as medical bills, home repairs, and fender benders. And your emergency fund might serve as a lifeline if you lose your job and don’t have another source of income.

A good rule of thumb is to save at least three months’ salary—but you don’t have to come up with those dollars all at once.

You could start by saving a small amount each month—and you can always add to the fund when you get a raise, bonus, or tax refund. (You also should be prepared to replenish the fund if you have to use all or part of it at any point.)

The money in your emergency fund could go into a savings account at your local branch bank, or you might want to check out the benefits of an online bank account like SoFi Checking and Savings®, which has no minimum balance and no account fees.

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning 1% APY on your cash!

A Bucket for Short-Term Goals

Back in the day, your mom or grandma might have talked about belonging to a “Christmas club”—which probably sounded like fun at the time but was really just a holiday shopping fund stashed at her local bank or credit union. (And if Grandma took out the money too early, she paid a penalty.)

Some credit unions still offer Christmas clubs, but you can start your own short-term fund in your account. You can label the account “holiday spending,” or earmark it for any other short-term goal: “Fall Wardrobe,” “Beach Vacation,” or maybe a “New TV.”

And here’s a perk Grandma probably didn’t have: You may be able to set up an auto-transfer from your paycheck and track your progress.

A Bucket for Long-Term Goals

Setting aside money for a long-term goal—a down payment on a house, a honeymoon in Bali, a year in Paris with your bestie—can feel like a slow slog. But you may improve your chances for success if you set up an account for the money and designate a consistent amount to slip in there from every paycheck.

Depending on your timeline, you may want to check into a certificate of deposit (CD), or you could stick with that same high-interest savings account, which you can build with automatic deposits and link to other accounts with a tracking app.

Retirement Savings

If you have a 401(k) investment savings account available through your employer, you’re likely already building wealth for retirement with automatic contributions every payday. And if your employer offers any type of matching contribution, you have an opportunity to grow your money even faster.

Beyond that, it’s up to you how big of a slice of your savings pie you want to put toward retirement at any time.

If you’re just starting out, and especially if you have some debts to pay off, saving for retirement may seem like the least of your worries. But the earlier you start putting money away, the faster it can grow through the power of compounding interest.

And time is the investor’s true friend; it allows you to ride the ups and downs of the market without panicking as you work toward your goals.

If you don’t have an employer-sponsored plan—or even if you do, but you want more investment options or maybe more help than you’ve been getting—you can open your own traditional or Roth IRA outside of work. When considering which type of retirement account to open, IRA or 401(k), you might want to keep an eye on what fees might be associated with each plan.

It’s important to note that employer-sponsored plans allow investors to contribute more annually than an IRA would (basic limit in 2020: $19,000 for a 401(k) vs. $6,000 for an IRA). And if the employer offers a matching contribution, that’s essentially free money you wouldn’t get from an IRA.

SoFi members, for example, can access personalized financial services based on their individual situation and goals. And members can use our online brokerage account and be as hands-on or hands-off as they want to be with their portfolio.

Deciding On Your Goals and Setting a Timeline

Goals are a good thing—they can provide motivation for saving. But they can’t just hang out there; they probably need some prioritizing.

Some goals will be easy to plot on a timeline. For example, if your wedding is in a year and you’re saving $6,000 for your honeymoon, you’ll need to save $500 a month.

Others goals will likely need more finessing. (The amount you might need for retirement, for example, can be tough to pin down.)

But you’ve got this. You’ve probably been editing your mental wish list since you were a kid saving for candy … no, a toy … no, a bike. And you’ll likely be doing that for the rest of your life. If there isn’t enough money, something has to go or, at least, wait.

Could you drive your old car for another year or two if it meant getting a house sooner? Should you work another year before taking time off to be a stay-at-home parent? Would a weekend in Vegas be ok this year if it meant next year’s vacation might be 10 days in Greece? Only you can make those choices.

Deciding how much money you’ll need when you’ll need it, and how long it will take to save it may seem daunting as you start toward each new goal.

But it also can help you stay motivated to note when you’re making headway. And you might even find new ways to cut expenses as you go—especially if you use an app to track your progress.

Don’t Forget Debt

According to the Federal Reserve Bank of St. Louis , Americans’ credit spending was greater than ever in 2019, and debt levels reached record totals. Overall consumer debt reached $13.9 trillion at the end of the second quarter of 2019, while the total amount of outstanding debt hit $4.1 trillion.

If you’re a part of those statistics, paying off those debts could be the most important part of your saving plan.
How’s that?

Any debt on which you’re paying interest can feel painful. But if you’ve missed some credit card payments and you’re paying the default rate, say 29%, you’re likely putting an awful lot of money toward your past instead of toward your future.

High-interest debt can drag you down, so it’s important to ditch it as quickly as possible. Once you know where you stand with your budget and your savings goals, you may want to start by building a sort of “starter” emergency fund, sometimes called an account buffer—then move forward with a personal debt reduction plan, like the debt avalanche, debt snowball, or the hybrid debt fireball, which focuses on paying high-interest debt in a way that can build momentum and keep you motivated.

Here’s how the fireball method works:

1. Categorize your debts as either “good” or “bad.” (“Good” debts are generally for things that have potential to increase your net worth, like student loans or a mortgage. “Bad” debt is usually considered to be debt incurred for a depreciating asset, like car loans and credit card debt.) As you develop the list, note all the debts with an interest rate of 7% or higher. This is likely the debt you’ll want to focus on first.

2. List your “bad” debts from smallest to largest based on their outstanding balances.

3. Make the minimum monthly payment on all outstanding debts, then funnel any excess funds to the smallest of your “bad” debts.

4. When that balance is paid in full, go on to the next smallest on the bad-debt list. Blaze through those balances until all your “bad” debt is repaid.

5. When that’s done, keep paying off your debt on the normal schedule while also putting more into various savings strategies that will help get you to your goals.

Remaining Flexible

Consistency can be a key to successful saving. Otherwise, it’s just too darn easy to let yourself off the hook from paycheck to paycheck, month to month, and year to year. But that doesn’t mean your savings plan has to feel like a forced march.

Flexibility is also important.

A savings plan that seems smart and doable today may feel like torture six months from now. Or you might get a raise and decide your plan is actually far too easy and you could be socking away much more.

You might wreck your car. Get married. Have a baby. Get sick. Get fired. Or get hired for your dream job and have to move to Dubai.

Life changes. So it makes sense to tighten and lighten your budget—and the savings aspect you build into that budget—as necessary. If you’re tracking your expenses regularly, you may be better able to gauge how you’re doing—good or bad—and do something about it more quickly.

Anything Is Better Than Nothing

The good news is the tools savers and investors use keep improving. You can open a checking and savings account like SoFi Checking and Savings® without worrying about a minimum balance. With SoFi Checking and Savings you can spend, save, and earn all in one account.

Don’t be afraid to dream big but save small.

Maybe 20% of your income for savings is implausible right now, but any amount is better than nothing. You can still set goals and commit to getting there on a timeline that suits your needs. Developing a habit of saving can be a goal in itself.

Want to see how tracking your spending and saving can help you reach your financial goals? Check out how SoFi Checking and Savings can help.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 8/9/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.


All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender