How Much Should I Save

With the economy in a downturn, it is increasing difficult to save money. Depending upon your salary and household budget, how much should you save?

To begin with, the general recommendation is to contribute at least 10% of your paycheck towards your pension. In addition, it is also advised that an increase of 10% should be added once you reach the age of fifty. The maximum of 20% will ensure that, by the time you do retire, you will have enough money to live on. However, most people cannot afford 10%, let alone a 20% contribution these days.

However, if you begin with a 5% contribution and then increase it by 1% annually, the amount saved will not seem as dramatic as if you started with 10%. Moreover, the net paycheck will not significantly decrease and you will be able to budget accordingly.

Saving money requires making sacrifices. First, a budget is recommended so that you can ascertain how much money you can put into a savings account. If you ask people how much they save, you may be given a variety of answers depending upon their circumstances. Some put away $5.00 a week; some $10.00 a week. Taking into account mortgage or rent, food, utilities, clothing, gas, car payments, school supplies, tuition, and any credit card debt, you may find your budget does not yield any extra money.

Unfortunately, today most people live paycheck to paycheck. So how much should I save? While we have covered the pension contribution, which is the most important, the decision on how much money to save varies with every individual.

Most banks have Vacation and Christmas Clubs. Let’s assume, for argument’s sake, that you open a $5.00-a-week Vacation Club. By the end of the year, you will have $260.00. If you open a $10.00-a-week Vacation Club, you will have amassed $520.00. The same applies for the Christmas Club.

Or, if you prefer, you can save $20.00 a week and put it into your savings account. By the end of the year you will have $1040.00 saved, not including interest. Perhaps your company has a savings plan wherein the money is deducted from your paycheck.

The secret is to decide on an amount that you can put away weekly without feeling the pinch. It is not required that you start with a hefty sum, but add a column to your budget such as “dollar-away” or ”rainy day” and then figure out, after all the bills have been paid, how much you can easily put away in a savings account.

For most people, it’s not how much you should save, but whether you can faithfully put away a set amount every week. As stated earlier, the only way to determine how much you can afford to put away is via the budget. If you stick to the budget, you should be able to put away a maximum of $20.00 a week. But, then again, it solely depends on your own circumstances. If the budget allows less, then it’s less. If you can afford more, this is great too!

As long as you set aside a dollar amount, whether it's less one week or more another week, you will not only feel less stressed about your finances, but you will be able to establish a realistic budget that you can stick to.