You should save at least 20% of each paycheck. Most financial experts agree on this 20% target, and one of the most popular budgeting strategies, the 50/30/20 rule, involves saving 20% of your income while putting the rest toward needs and wants.
The exact amount of each paycheck that you’re able to save may vary based on things like your debt and living expenses. But in general, the more you can put away, the better.
Key Things to Know
- You should try to save at least 20% of your paycheck.
- The money you save should be split into different categories, with money going into an emergency fund, a retirement account, and a savings account for other financial goals.
- It’s best to use accounts, such as a money market account or traditional savings account, that will pay you interest on your savings.
- Automating your savings and reducing your discretionary spending are things you can do to help achieve your savings goals.
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How to Determine How Much of Your Paycheck to Save
To determine how much of your paycheck to save, first set a savings goal and then work backward to figure out how much you need to save per paycheck to achieve it. Don’t forget to factor in other financial obligations, such as your current debts and how much money you need to put toward your living expenses. You might need to adjust either your goal or your nonessential spending to make it work. You can also follow budget rules, like the 50/30/20 rule, for guidance.
1. Set a savings goal.
Whether it’s for retirement, to build an emergency fund, or to buy a new car or house, you first need to decide what you want to save the money for. This will give you some insight into how much you should be saving from your paycheck to meet your goal.
For example, if you plan to save $5,000 over the next 6 months to put a down payment on a car, and you get paid twice a month, you will need to save about $417 per paycheck to meet your goal. If you have multiple savings goals, consider how much money you want to put toward each as you figure out how much to save.
2. Factor in your financial obligations.
Your financial situation plays a big role in determining how much of your paycheck you can save. For example, if you are living from paycheck to paycheck, you will have very little left over – if any at all – from each paycheck to put into savings. You should add up all your debts and living expenses to calculate what you have left over to save.
Debt Obligations. Debts, such as student loans, credit card balances and personal loans, reduce the amount of money you have available to contribute to savings. Essentially, the more debt you have, the less you are going to be able to save.
Living Expenses. The more you have to pay for your living expenses, such as mortgage, groceries, gas, and entertainment, the less money you will have to save. You can reduce your spending on nonessential expenses, like traveling and dining out, if you want to increase the amount of money you save from each paycheck.
3. Use a budgeting strategy.
Budgeting strategies, such as the 50/30/20 rule, can tell you exactly how much of your paycheck to save. We run down some common budgeting strategies below.
50/30/20 rule: You separate your necessary expenses from your discretionary spending, with 50% going to needs, 30% for wants, and the remaining 20% going to savings.
60/30/10 rule: You allocate 60% for needs, 30% for wants and 10% for savings. Compared to the 50/30/20 rule, this reduces the amount you put into savings and allocates more to your necessary living expenses.
75/15/10: This rule lumps your essential and nonessential spending together, with 75% of your paycheck going to living expenses, 15% going to investments, and 10% for savings.
Zero-based budgeting: This budgeting strategy is a bit different than the percentage-based rules. Instead of saving a predefined percentage of your paycheck, you will assign each dollar of your income to a specific monthly expense, including to savings. Once you cover your living expenses, you should allocate the remaining funds from your paycheck to savings, until you reach zero.
Learn more about popular budgeting strategies.
4. Review and adjust if necessary.
Review your savings goals regularly to make sure you are staying on track. If not, look where you can adjust your spending so you can put more of your paycheck towards savings. You might also want to adjust how much you save if your salary changes or if you have new expenses to factor into your budget.
Different Types of Savings Goals
When you save money from your paycheck, you should allocate the savings to different goals. They should include building an emergency fund, preparing for retirement, and saving for other goals such as buying a new house or car.
Emergency Fund
An emergency fund is money you set aside to use for unexpected expenses and events such as an expensive home repair bill or a job layoff. According to WalletHub Emergency's Saving Survey, 44% of people are not confident they have enough funds to cover an unexpected expense.
Having an emergency fund can prevent you from dipping into the money you have allocated for your other living expenses and may reduce the likelihood of going into debt. Financial experts recommend having enough money to cover three to six months’ worth of your living expenses in your emergency fund.
Retirement
You should plan to put 10% to 15% of your paycheck in a retirement account. This helps ensure you have funds to pay for your living expenses once you stop working. In our Retirement Savings Survey, 1 in 3 people state they do not have a retirement plan.
Other Savings Goals
After putting some money into your emergency and retirement accounts, you can allocate the remainder of what you save from your paycheck to other financial goals. These can be long-term goals, such as a college fund or a down payment for a house, or short-term goals, like a vacation or an ungraded TV.
How Much Americans Are Saving
Many Americans are not saving 10% to 15% of their paycheck as recommended. In fact, over the past 10 years, Americans only saved about 6% of their disposable income, on average.
| Year | Percent of Income Saved |
| 2024 | 4.4% |
| 2023 | 4.6% |
| 2022 | 3.4% |
| 2021 | 6.1% |
| 2020 | 11.8% |
| 2019 | 6.9% |
| 2018 | 6.5% |
| 2017 | 5.6% |
| 2016 | 5.4% |
| 2015 | 5.6% |
Source: U.S. Bureau of Economic Analysis
Note: The average savings are taken from the month of November each year.
How to Save More Money
Create a budget. Making a budget helps you organize your expenses so you can prioritize which expenses you should allocate your paycheck to. This can prevent you from spending money on unnecessary things and instead allow you to put that money into your savings.
Reduce unnecessary spending. Review your spending to see if there are areas where you can cut back. Some things you can do to reduce spending include:
- Avoid impulse buys.
- Cook at home instead of eating out at restaurants.
- Reduce energy use at home.
- Bundle services, such as internet and phone, to get a discount.
- Look for free entertainment, like community festivals, instead of paying for concerts or sporting events.
- Use coupons.
Automate your savings. Set your checking account to automatically transfer money into your savings every time you get your paycheck. It will be one less thing you’ll have to physically remember to do. Depending on your employer, you may also be able to do a split direct deposit, where you have your employer automatically deposit a portion of your paycheck into your savings account and the rest into your checking account.
Shop around for the best prices. Comparing prices from different retailers allows you to find the best deal for the item you need. For example, a bag of potatoes may be $3.99 at one grocery store and $6.99 at another. You also want to compare different brands within the same store as prices can vary significantly between brands.
Pay off your debts. As mentioned in the previous section, the more debt you have, the less you can save. Some of the best ways to tackle debt are to pay the balances with the highest interest rates first and to simply contact your creditor or lender to see if you can get a lower interest rate.
Increase your income. The more money you make, the more you can save. You may want to consider working overtime, asking for a raise, working a side gig, or switching jobs entirely to boost your income.
Learn about other ways to save.
Where to Put Your Savings
You should put your savings from your paycheck in an account that earns interest, such as a traditional savings account or a money market account, so your money can grow while you’re not using it.
Examples of Interest-Earning Accounts
Traditional savings accounts: Savings accounts are basic accounts that let you earn interest on the balance. They are slightly less accessible than checking accounts, with many savings accounts having a limit of six withdrawals or transfers per month.
High-yield savings accounts: High-yield savings accounts typically offer higher interest rates than regular savings accounts. However, some may require you to maintain a relatively high minimum balance or have a linked account from the same institution.
Money market accounts: Money market accounts usually offer high interest rates, but they may require a minimum balance and usually limit the number of transactions you can make by debit card, check or electronic transfer.
Certificate of deposits accounts: With a certificate of deposit (CD) account, you agree to keep your money in the account for a specific amount of time, usually for a few months to several years, in exchange for a fixed interest rate that is usually higher than the one offered on a regular savings account. The catch is if you withdraw the funds before the maturity date, or the date you agreed to keep the money in the account, you may incur penalties.
Learn more about savings accounts.
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