How much should I save every month?

We should all be saving money, right? But how much, and how regularly? Though it’s thrown around as a basic part of personal finance, a lack of clarity often leads to… saving nothing at all. Here’s how to stop your cash from stagnating in your current account and have it work for you in your savings.

The thing about personal finance is there’s no 'one size that fits all'. Yes, there are some lessons we should probably keep in mind. But when it comes to the specifics of how to handle yourmoney – the answer will depend on, well, your money.

In other words, to work out how much you should save, and how often, you need to know a few things about your current situation.

First up – how much do you earn?

Step one in working out how much to save is getting really clear on what you’re bringing in. Considering one study found that 39% of people in the UK didn’t know exactly what they earn, this is a crucial one that’s often missed. Take a look at the last few months of your payslips or bank statements to see what comes in every month. Look for the general date you get paid and if there are any fluctuations that might need investigating.

Next – what are you spending?

This one might seem just as basic as looking at your income. However, with contactless payments, long-ago-set-up subscriptions and Direct Debits, it’s easy to be in the dark about exactly what you spend each month. Again, go through the last few months of your spending in your bank statement or transaction history. When you actually look at every pound and penny, it may well become clear the places you can cut back.

Do you need it or want it?

Just looking at your transactions is a good start, but not the whole task. The mission now is to separate your spending according to ‘wants’ and ‘needs’. In other words, you probably need a roof over your head, electricity and food. These are the regular spending and bills that must be made. And ‘wants’? As the name suggests, these are the things we spend on that enhance our quality of life but we could easily do without. Like that monthly shopping splurge or multiple takeaways per week.

Separate your spending

Separating wants and needs is important because when deciding how much money to save, we’ve got to know what’s available i.e. income minus ‘needs’ = available cash to be saved.

However, unless we’re in a financial pickle, we’d ideally account for some ‘wants’ in our monthly spending. Life’s for living after all. The catch is, we should really be clear on exactly how much we allocate to our wants. That way, every month, we know what’s going on bills (needs), fun spending (wants) and savings.

How to work out how much to save

Write down the following, based on your income and spending over the last few months:

1 – Your monthly income

2 – Your monthly ‘needs’ (spend)

3 – Your monthly ‘wants’ (spend)

When you minus your ‘needs’ and ‘wants’ from your income, you’ll get:

4 – Your ‘Safe to save’ number

If you’re struggling, remember the general guidance is to use the 50/30/20 rule. That’s 50% of your income on ‘needs’, 30% on ‘wants’ and 20% on savings and investments.

Bonus points – put it on auto

Though we all have the best intentions, it's easy to let the habit of regular saving slip. So, to make sure it happens no matter what, why not automate it? At the beginning of the month, you could set up a standing order to send your ‘safe to save’ number straight to your savings account. That way, it won’t be eaten into by anything outside of your budget.

Look for a high-interest savings account – to maximise your savings and allow compounding to work in your favour – but read the terms first, as some have conditions to meet or restrictions on when you can get your money out.

With up to a third of Brits having either no savings at all or less than £1,000, make sure you’re doing all you can to try and protect yourself against future challenges.

Looking for somewhere to keep your savings? Bank with Chase and you can open a saver account. Start saving with as little as you like, and we’ll calculate your interest daily and pay it monthly.

18+, UK residents. A Chase current account is required to open a saver account.

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