This is an age-old question that often ends in a very quick change in subject. Saving has become a touchy subject as the cost of living has increased: house prices, schooling, groceries, and everything in between has exponentially increased, and so saving a portion of our monthly salary often becomes impossible or something ‘I am just not able to do’.
However, saving something is better than not saving anything at all. The conundrum around saving is that it seems like a huge cost/burden in the present but reaps a whole lot of benefits for the future. So how much should you be saving each month?
Deciding on the amount that you want to save, is dependent on your goals. Your ideal savings rate depends on your specific, long-term reasons for saving.
A good strategy in order to plan your saving is this:
Write your ideal savings goal and its deadline. Divide this by the number of months remaining to see how much you should save.
For example, let’s say you want to pay cash for a R10 000 car in five years’ time? You’ll need to save R167 per month.
When you go through this exercise, you’ll probably discover that you can’t save enough for every goal on your list. In this case, you have four options:
- Re-imagine your goals
- Lengthen your timeline
- Cut your current spending
- Earn more
An easier way to save is to follow the popular 50/30/20 rule, where you reserve 50 percent of your salary for essentials like rent and food, 30 percent for discretionary spending, and at least 20 percent for savings. Why 20%? Research suggests that if you want a shot at being secure through your retirement, and living comfortably, the numbers suggest that 20 percent is the number you’ll want to reach or exceed in order to achieve this.
Saving 20 percent of your monthly income seems exorbitant, and it’s not always that cut and dry to suggest the right percentage of income for YOU to save. No matter how much you are earning, or how much you are saving, the sooner you start saving, the better.
Reading material
How much of my income should I save every month?
How Much Should You Save Every Month?
Here’s how much money you should have saved at every age
