![]() ![]() Most people opt for a combination of those four choices. When you run through this exercise, you'll probably discover that you can't save enough for every savings goal on your list. Want to pay cash for a $10,000 car in five years? You'll need $167 per month. Divide by the number of months remaining to see how much you should save. Write your ideal savings goal target and deadline. (If it's easier, list broad categories like "home repairs," "holidays" and "wedding.") Make a list of major expenses within the next decade, ranging from replacing your gutters to throwing your wedding. Can you save this monthly? If so, you'll build a six-month emergency fund within the next year. How much do you need to survive?ĭivide that number in half. Assume that if you lose your job, you'll sacrifice luxuries such as pedicures or your premium cable TV package. How can you save such a large sum? First, calculate your monthly cost-of-living. You should also consider establishing an "emergency fund" that can cover 3-9 months of your living expenses. Our online tools can help you calculate your needs for retirement and other financial goals. If you save 5% of your income and your boss matches another 5%, you've accomplished a 10% savings rate. Sound daunting? Don't worry: your employer match, if you have one, counts. ![]() You should consider saving 10 - 15% of your income for retirement. Now back to the original question: How much should you save a month? Let's break this down by goal: 1. Retirement is the ultimate long-term savings goal. You might use this money to replace your dishwasher, fix your car's timing belt, cover a major insurance deductible, stay afloat when you're between jobs and make a down payment on a home. Your short-term savings can get used to vacation in Aruba, buy holiday gifts or pay your taxes. There are three timelines you should consider: Less than 1 year ![]() Your ideal savings rate depends on your specific, long-term reasons for saving. The concern with placing your emergency savings in mutual funds, stocks or other assets is that they may lose value if the funds need to be accessed quickly.When someone asks how much money they should save each month, I throw them a curveball reply: Where should you put the money?Įmergency savings are best placed in an interest-bearing bank account, such as a money market or interest-bearing savings account, that can be accessed easily without taxes or penalties. You may also want to consider adjusting the amount based on your bill obligations, family needs, job stability, or other factors. This amount can seem daunting at first, but the idea is to put a small amount away each week or two to build up to that goal. While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months’ worth of expenses. Instead, this fund serves as a safety net, only to be tapped when an emergency occurs. It shouldn’t be considered a nest egg or calculated as part of a long-term savings plan for college tuition, a new car, or a vacation. What is an emergency fund?Īn emergency fund is a separate savings or bank account used to cover or offset the expense of an unforeseen situation. While emergencies can’t always be avoided, having emergency savings can take some of the financial sting out of dealing with these unexpected events. A sudden illness or accident, unexpected job loss, or even a surprise home or car repair can devastate your family’s day-to-day cash flow if you aren’t prepared. When they happen, they can derail your financial stability. Emergencies, by their nature, are unpredictable. ![]()
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