How Much Money Should I Save?

The million dollar question (pun!): How much should I save?

Well, there’s a complex answer and a simple answer. In most cases, you’ll get the complex answer.

It depends.

Everyone’s number is different because we each have different savings goals. Saving for a car is different than saving for a house. Saving for a house is different than saving for college. Saving for college is different than saving for retirement.

Some factors that aid in calculating your savings number:

  • How much do you need for your goal?
  • What have you already saved?
  • How long before your goal takes place?
  • Where will you invest your savings, and at what growth rate?
  • How much can you afford to save?

As adults, your savings number will likely be limited to the last question: How much can you afford to save? I challenge you to reverse your thinking: How much can you afford to spend? Recite the following motto, specifically in this order: SHARE, SAVE, SPEND.

Looking at spending last will be a good way to focus on your savings goals and forces you to examine how much you must earn to afford your lifestyle.

A good rule of thumb is to save one-third (1/3).

Earlier I mentioned that there is a simple answer to the question of savings. If you are young and don’t have any major goals yet or are just starting out, a good rule of thumb is to save one-third (1/3). Any time you receive money, share a third, save a third, and spend the rest!

So ask yourself the question: How much should I save? Don’t get discouraged if your number seems high. Remember that you can adjust some factors to reach your savings goal, like decreasing or delaying your goal. Even if you save a small amount now, you are still building the blocks to your financial future. As you continue, increase your savings little by little. Soon enough, you will be savvy at saving without giving it any thought!

Tune in next week to learn why “sharing” is first on my list. Or subscribe below to automatically receive weekly lessons in your inbox!

Homework: The next time you get allowance or money, make sure you know how much is going into each of the 3 S’s: Share, Save, and Spend. Can you save one-third or more? What would a small increase in savings do for your goal?

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A Good Four-Letter S— Word: Save

If having savings is a good thing, why does the act of saving money get such a bad reputation? Do we dread saving money because we live in a world of instant gratification and don’t have the patience to spend our money later? Maybe. Is it tough to accumulate savings when we have other bills to pay? Of course. Do we sometimes get overly enthusiastic when we first start saving, only to jump ship halfway? It happens. How do we overcome these obstacles?

Delayed Gratification

If you were given a choice between winning a new electric scooter or a trip to Disney World, which would you choose? You’d probably choose Disney World because it’s more expensive. What if you can get the scooter now, but the trip requires waiting three years? You’d switch to the scooter, wouldn’t you?

Wait a second! Just a moment ago, you wanted Disney World, remember? Don’t let short-term impulses get in the way of your long-term dreams. If you want something bad enough, it’s worth waiting for. That’s the power of delayed gratification.

(In case you are not a Disney fan, feel free to substitute your own dream purchase in this scenario.)

Automated Savings

Balancing savings and expenses can be a challenge. One solution is to budget, so that your savings take a dedicated amount like any other bill.

Another way to prioritize saving money is through automated savings. Whenever money comes in, whether it be allowance or working income or gift money, automatically save a portion. Direct deposit makes this easy by routing a percentage or dollar amount to an account, which you can assign for a specific purpose.

Celebrate Small Victories

The hardest part about saving may be the journey to reach your goal. It’s easy to lose sight or get distracted if you don’t celebrate small victories. Consider giving yourself a little boost or reward for reaching milestones along the way to your goal. Buy yourself a keychain or take a test drive at the arcade after saving $200 towards your first car. Reward yourself with pizza every time you reach a big step towards your dream trip to Italy. You get the idea.

Parents can help by throwing in a savings match. For instance, offer a nickel for every $1 dollar that your child saves or alternatively, pitch in $5 after your child reaches $100, $10 after reaching $200, and so on. Little incentives go a long way with motivation!

Yes You Can!

Savings takes work. But that work can be fun once it’s automatic and if you put the savings toward an achievable goal that excites you. Figure out what it is that you really want, and then start saving!

Tune in next week to learn how much you should be saving. Or subscribe below to automatically receive weekly lessons in your inbox!

Homework: The next time you are faced with an impulse purchase, ask yourself if you would rather save the money towards a bigger goal. Think of a goal you really want, something that shows saving money is good!

If you like this lesson and want to see more, please consider a donation on GoFundMe.