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If you want to build financial security and hit your long-term savings goals, it’s probably a wise move to put a portion of each paycheck into a savings account.

Most people agree that saving is important, but it can be challenging to know how much to stash away. Some people save 10% of their take-home pay, others three or four times that amount. Still others deposit a round number (be it $50, $500, or $5,000), into their savings account on a regular basis.

How much you should save depends upon a variety of factors, including your personal style and financial aspirations. In this guide, you’ll learn how to determine how much to save, plus hear smart advice on how to prioritize and reach your goals.

What Percent of Your Income Should You Save?

There isn’t a set percentage of how much of your annual income you should save. Much will depend on your particular circumstances. For example, your income, your cost of living, your expenses, and your debt level will all matter. A person who earns $75K per year, lives in an expensive city, has student loans to pay off, and is supporting a family of four will likely find it more difficult to save money than someone who is earning $125K, lives in a less pricey location, has zero loans to pay down, and is single with no dependents.

That said, you are likely to hear that 20% is a good number to aim for in terms of the percentage of your income to be saved. If that proves too high, then 10% is a good figure to use as a goal.

Pros and Cons of Saving a Fixed Percentage of Your Income

Sure, saving money is important. But what about saving a percentage vs. a specific dollar amount?

There are pluses and minuses to saving a fixed percentage of your income. This approach may or may not work for everyone. Consider the upsides first:

•   It’s consistent. You know that every paycheck, the percentage you’ve indicated will be heading into savings, helping you reach your financial goals. Even if your earnings vary, your savings will be aligned.

•   It protects you against lifestyle creep. If, say, you are saving $500 per pay period and then get a raise, you might just spend all of that additional cash you are earning. Called lifestyle creep, that means your expenses rise, gobbling up your enhanced income.

When, however, you set a percentage to go into savings from your checking account or other source, you know that the amount will automatically adjust with any income fluctuations. For instance, if your pay varies depending on your hours or goals achieved, you will always be allocating the same ratio of your money to savings, whether you earn more or less.

But there are potential downsides to consider too.

•   It may feel more challenging to know how much you’re socking away when you determine a percentage of income to save. Again, if you allocate $500 a month to savings rather than a percentage, it’s easy to calculate where you stand at any moment during the year.

•   The way a percentage automatically adjusts to income changes may not suit you. For example, if you are saving 20% of your salary and then get a $10K raise, the amount funneled into savings will rise correspondingly. But what if you wanted to earmark that money to pay down your credit card debt more quickly? You will have to take steps to adjust where your money goes.

The 50/30/20 Rule

If you’re wondering, “What percent of my income should I save?” the 20% figure is likely to crop up often. One reason: the 50/30/20 budgeting rule, which was made popular by Sen. Elizabeth Warren and her daughter, Amelia Warren Tyagi, in a book they co-wrote. It suggests savers should allocate their money as follows:

•   50% of their after-tax paychecks toward essentials like housing, food, healthcare, and minimum debt payments.

•   30% toward discretionary spending

•   20% toward savings

So, someone who takes home $3,000 every two weeks (or $78k per year) might put $1,200 a month into savings. They would have $15,600 at the end of the year.

That’s just a guideline for getting started, though, so don’t panic if putting 20% into savings seems impossible right now. You can start at 10% or bump it up to 30% or more.

Recommended: 50/30/20 Calculator

It All Starts With a Budget

Making a budget may sound boring or even arduous, but it doesn’t have to be either. And sticking to a realistic spending plan can make or break a savings plan.

By prioritizing monthly expenses — from keeping a roof over your head to gassing up the car to indulging in a gelato or good sushi every Friday — you may be able to avoid impulse spending and hold on to more of your hard-earned dollars.

You can track your spending manually with a notebook or spreadsheets, or keep the data in the palm of your hand with a money-tracking app, where you can see your expenses, savings, and earnings all in one place whenever you want to take a peek.

4 Different Types of Savings

Once you determine what percentage you’ll be able to save from your salary, you may want to break down that amount even further, into separate designated “buckets” or sub-accounts for different goals, which could include things like:

1. Emergency Fund

An emergency fund has the potential to turn life’s potholes into speed bumps.

It’s money you can use to pay for unexpected expenses, such as medical bills, home repairs, and fender benders. And your emergency fund might serve as a lifeline if you lose your job and don’t have another source of income.

A good rule of thumb is to save at least three months’ salary, but you don’t have to come up with those dollars all at once.

You could start by saving a small amount each month — and you can always add to the fund when you get a raise, bonus, tax refund, or other money windfall. (You also should be prepared to replenish the fund if you have to use all or part of it at any point.)

The money in your emergency fund could go into a savings account at your local branch bank, or you might want to check out the benefits of an online bank account which might offer no account fees and a solid interest rate.

2. Short-Term Goals

Most of us have goals we hope to fund in the next few months or couple of years. This could be anything from throwing your significant other a memorable birthday party to booking that vacation to Positano to affording a new car. You can start your own short-term fund at your financial institution. You can label the account “holiday spending” or earmark it for any other short-term goal: “Fall Wardrobe,” “Beach Vacation,” or maybe a “New Laptop.”

You may want to automate your savings and have money whisked from your checking as soon as your paycheck hits.

3. Long-Term Goals

Setting aside money for a long-term goal — a down payment on a house, a honeymoon in Bali, a year in Paris with your bestie — can feel like a slow slog. But you may improve your chances for success if you set up an account for the money and designate a consistent amount to slip in there from every paycheck.

Depending on your timeline, you may want to check into a certificate of deposit (CD), or you could stick with that same high-interest savings account, which you can build with automatic deposits and link to other accounts with a tracking app. These are secure ways to save towards future goals.

4. Retirement Savings

Another aspect of how much of your annual income you should save involves preparing for retirement. If you have a 401(k) investment savings account available through your employer, you’re likely already building wealth for retirement with automatic contributions every payday. And if your employer offers any type of matching contribution, you have an opportunity to grow your money even faster.

Beyond that, it’s up to you how big of a slice of your savings pie you want to put toward retirement at any time.

If you’re just starting out, and especially if you have some debts to pay off, saving for retirement may seem like the least of your worries. But the earlier you start putting money away, the faster it can grow. Time is the investor’s true friend; it allows you to ride the ups and downs of the market without panicking as you work toward your goals. (Remember, investments aren’t insured, so you need to be aware of the risk involved.)

If you don’t have an employer-sponsored plan — or even if you do, but you want more investment options or maybe more help than you’ve been getting — you can open your own traditional or Roth IRA outside of work. When considering which type of retirement account to open, IRA or 401(k), you might want to keep an eye on what fees might be associated with each plan.

It’s important to note that employer-sponsored plans allow investors to contribute more annually than an IRA would. With a 401(k), you can contribute up to $23,500 in 2025 ($24,500 in 2026) if you’re under age 50, while an IRA caps contributions at $7,000 in 2025 ($7,500 in 2026) for those under 50.

Deciding on Your Goals

Goals are a good thing: They can provide motivation for saving. But they can’t just hang out there; they probably need some prioritizing. That doesn’t mean that you are picking just one to focus on. More likely, you are going to decide how to divvy up that percentage of your income that goes into savings.

Say you are committed to saving 20% of your income. You may want to determine percentages for:

•   Retirement

•   Your child’s college education

•   A down payment on a house

One person might split that as 10%, 5%, and 5%. Another might instead do 8%, 2% and 10%. It depends on your particular goals, how else you might finance them (perhaps you expect your child to take out student loans), and the urgency of each.

Setting a Timeline

Some goals will be easy to plot on a timeline. For example, if your wedding is in a year and you’re saving $6,000 for your honeymoon, you’ll need to save $500 a month.

Others goals will likely need more finessing. (The amount you might need for retirement, for example, can be tough to pin down.) Could you drive your old car for another year or two, thereby saving money daily, if it meant getting a house sooner? Should you work another year before taking time off to be a stay-at-home parent? Only you can make those choices.

Deciding how much money you’ll need when you’ll need it, and how long it will take to save it may seem daunting as you start toward each new goal. But it also can help you stay motivated to note when you’re making headway. And you might even find new ways to cut expenses as you go.

Pay Off Debt

The average American had almost $8,000 in high-interest credit card debt as of the end of 2022. In addition, many people are also shouldering other debts, such as car loans and student loans.

If you’re a part of those statistics, paying off those debts could be the most important part of your saving plan.

•   Any debt on which you’re paying interest can feel painful. But if you’ve missed some credit card payments and you’re paying the default rate (almost 30% in mid-2025), you’re likely putting an awful lot of money toward your past instead of toward your future.

•   High-interest debt can drag you down, so it’s important to ditch it as quickly as possible. A personal debt reduction plan, like the debt avalanche, debt snowball, or the hybrid debt fireball, can help you pay off high-interest debt in a way that can build momentum and keep you motivated.

Here’s how the debt fireball method works:

1.    Categorize your debts as either “good” or “bad.” (“Good” debts are generally lower-interest and involve things that have potential to increase your net worth, like student loans or a mortgage. “Bad” debt is usually considered to be higher-interest and incurred for a depreciating asset, like car loans and credit card debt.)

2.    List your “bad” debts from smallest to largest based on their outstanding balances.

3.    Make the minimum monthly payment on all outstanding debts, then funnel any excess funds to the smallest of your “bad” debts.

4.    When that balance is paid in full, go on to the next smallest on the bad-debt list. Blaze through those balances until all your “bad” debt is repaid.

5.    When that’s done, keep paying off your debt on the normal schedule while also putting more into various savings strategies that will help get you to your goals.

Remaining Flexible

Consistency can be a key to successful saving. Otherwise, it’s just too darn easy to let yourself off the hook from paycheck to paycheck, month to month, and year to year. But that doesn’t mean your savings plan has to feel like a forced march.

Flexibility is also important. A savings plan that seems smart and doable today may feel like torture six months from now. Or you might get a raise and decide you could be socking away much more.

Life changes. So it makes sense to tighten and lighten your budget — and the savings aspect you build into that budget — as necessary. If you’re tracking your expenses regularly, you may be better able to gauge how you’re doing and make any course corrections that much more quickly.

Anything Saved Is Better Than Nothing

It can feel discouraging when you get started on a long-term savings plan. Say you want to accumulate $60,000 for a down payment on a house. Perhaps saving 20% of your paycheck is impossible right now. And putting a couple of hundred dollars as a start can feel as if you will never reach your goal.

But over time, that little bit of money regularly contributed will indeed grow and propel you ever closer to your goal. Getting in the habit of contributing frequently can be a goal in and of itself, even if the amount is not as high as you’d like.

You may have also had this experience with shorter-term goals, such as building an emergency fund. Even if you only start by contributing $20, you will eventually reach your aim with steady saving.

The Takeaway

If you’re ready to start on the path to achieving a savings goal, look for a financial partner that minimizes fees and maximizes interest, to help your money work harder.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Is it good to save 50% of your income?

It’s a wise move to save a portion of your paycheck, and 20% is an often-quoted figure to aim for. Fifty percent may be too high for many people, but if you can afford to save half of your take-home pay, you may get to your savings goals that much more quickly.

Is 20% of your income enough to save?

Many financial experts recommend saving 20% of your income or more if you can. The 20% figure is part of the popular 50/30/20 budget rule. However, some people may want to save more if possible, especially if they have a couple of major long-term goals they are saving for, such as buying a home, saving for their children’s education, and affording an early retirement.

What is the 60/20/20 rule?

The 60/20/20 rule is similar to the 50/30/20 budget guideline. In this case, it means that a person allocates 60% of their take-home pay to necessities, 20% to discretionary spending, and 20% to savings.

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Your age is a major factor in the investment strategy you choose and the assets you invest in. The investments someone makes when they’re in their 20s should look very different from the investments they make in their 50s.

Generally speaking, the younger you are, the more risk you may be able to tolerate because you’ll have time to make up for investment losses you might incur. Conversely, the closer you are to retirement, the more conservative you’ll want to be since you have less time to recoup from any losses. In other words, your investments need to align with your risk tolerance, time horizon, and financial goals.

Most important of all, you need to start saving for retirement now so that you won’t be caught short when it’s time to retire. According to a 2024 SoFi survey of adults 18 and older, 59% of respondents had no retirement savings at all or less than $49,999.

Here is some information to consider at different ages.

Investing in Your 20s

In your 20s, you’ve just started in your career and likely aren’t yet earning a lot. You’re probably also paying off debt such as student loans. Despite those challenges, this is an important time to begin investing with any extra money you have. The sooner you start, the more time you’ll have to save for retirement. Plus, you can take advantage of the power of compounding returns over the decades. These strategies can help get you on your investing journey.

Strategy 1: Participate in a Retirement Savings Plan

One of the easiest ways to start saving for retirement is to enroll in an employer-sponsored plan like a 401(k). Your contributions are generally automatically deducted from your paycheck, making it easier to save.

If possible, contribute at least enough to qualify for your employer’s 401(k) match if they offer one. That way your company will match a percentage of your contributions up to a certain limit, and you’ll be earning what’s essentially free money.

Those who don’t have access to an employer-sponsored plan might want to consider setting up an individual retirement account (IRA). There are different types of IRAs, but two of the most common are traditional and Roth IRAs. Both let you contribute up to $7,000 in 2025 and 7,500 in 2026 for those under age 50. (Note that Roth IRAs have income limits.) But one key difference is the way the two accounts are taxed. With Roth IRAs, contributions are not tax deductible, but you can withdraw money tax-free in retirement. With traditional IRAs, you deduct your contributions upfront and pay taxes on distributions when you retire.

Strategy 2: Explore Diversification

As you’re building a portfolio, consider diversification. Diversification involves spreading your investments across different asset classes, such as stocks, bonds, and real estate investment trusts (REITs). One way twentysomethings might diversify their portfolios is by investing in mutual funds or exchange-traded funds (ETFs). Mutual funds are pooled investments typically in stocks or bonds, and they trade once per day at the end of the day. ETFs are baskets of securities that trade on a public exchange and trade throughout the day.

You may be able to invest in mutual funds or ETFs through your 401(k) or IRA. Or you could open a brokerage account to begin investing in them.

Strategy 3: Consider Your Approach and Comfort Level

As mentioned, the younger an individual is, the more time they may have to recover from any losses or market downturns. Deciding what kind of approach they want to take at this stage could be helpful.

For instance, one approach involves designating a larger portion of investments to growth funds, mutual funds or ETFs that reflect a more aggressive investing style, but it’s very important to understand that this also involves higher risk. You may feel that a more conservative approach that’s less risky suits you better. What you choose to do is fully up to you. Weigh the options and decide what makes sense for you.

Investing in Your 30s

Once you’re in your 30s, you may have advanced in your career and started earning more money. However, at this stage of life you may also be starting a family, and you likely have financial obligations such as a mortgage, a car loan, and paying for childcare. Plus, you’re probably still paying off your student loans. Still, despite these expenses, contributing to your retirement should be a top priority. Here are some ways to do that.

Strategy 1: Maximize Your Contributions

Now that you’re earning more, this is the time to max out your 401(k) or IRA if you can, which could help you save more for retirement. In 2025, you can contribute up to $23,500 in a 401(k) and up to $7,000 in an IRA. In 2026, you can contribute up to $24,500 in a 401(k) and up to $7,500 in an IRA. (Note: If you or your spouse have a 401(k), your ability to deduct traditional IRA contributions may be limited once your income passes certain thresholds.) If you have a Roth IRA, there are income limits you need to meet to be eligible to contribute the full amount, which is one thing to consider when choosing between a Roth IRA vs. a traditional IRA.

Strategy 2: Consider Adding Fixed-Income Assets to the Mix

While you can likely still afford some risk since you have several decades to recover from downturns or losses, you may also want to add some fixed-income assets like bonds or bond funds to your portfolio to help counterbalance the risk of growth funds and give yourself a cushion against potential market volatility. For example, an investor in their 30s might want 20% to 30% of their portfolio to be bonds. But, of course, you’ll want to determine what specific allocation makes the most sense for your particular situation.

Strategy 3: Get Your Other Financial Goals On Track

While saving for retirement is crucial, you should also make sure that your overall financial situation is stable. That means paying off your debts, especially high-interest debt like credit cards, so that it doesn’t continue to accrue interest. In addition, build up your emergency fund with enough money to tide you over for at least three to six months in case of a financial setback, such as a major medical expense or getting laid off from your job. And finally, make sure you have enough funds to cover your regular expenses, such as your mortgage payment and insurance.

Investing in Your 40s

You may be in — or approaching — your peak earning years now. At the same time, you likely have more expenses, as well, such as putting away money for your children’s college education, and saving up for a bigger house. Fortunately, you probably have at least 20 years before retirement, so there is still time to help build your nest egg. Consider these steps:

Strategy 1: Review Your Progress

According to one rule of thumb, by your 40s, you should have 3x the amount of your salary saved for retirement. This is just a guideline, but it gives you an idea of what you may need. Another popular guideline is the 80% rule of aiming to save at least 80% of your pre-retirement income. And finally, there is the 4% rule that says you can take your projected annual retirement expenses and divide them by 4% (0.04) to get an estimate of how much money you’ll need for retirement.

These are all rough targets, but they give you a benchmark to compare your current retirement savings to. Then, you can make adjustments as needed.

Strategy 2: Get Financial Advice

If you haven’t done much in terms of investing up until this point, it’s not too late to start. Seeking help from financial advisors and other professionals may help you establish a financial plan and set short-term and long-term financial goals.

Even for those who have started saving, meeting with a financial specialist could be useful if you have questions or need help mapping out your next steps or sticking to your overall strategy.

Strategy 3: Focus on the Your Goals

Since they might have another 20-plus years in the market before retirement, some individuals may choose to keep a portion of their portfolio allocated to stocks now. But of course, it’s also important to be careful and not take too much risk. For instance, while nothing is guaranteed and there is always risk involved, you might feel more comfortable in your 40s choosing investments that have a proven track record of returns.

Investing in Your 50s

You’re getting close to retirement age, so this is the time to buckle down and get serious about saving safely. If you’ve been a more aggressive investor in earlier decades, you’ll generally want to become more conservative about investing now. You’ll need your retirement funds in 10 years or so, and it’s vital not to do anything that might jeopardize your future. These investment strategies by age may be helpful to you in your 50s:

Strategy 1: Add Stability to Your Portfolio

One way to take a more conservative approach is to start shifting more of your portfolio to fixed-income assets like bonds or bond funds. Although these investments may result in lower returns in the short term compared to assets like stocks, they can help generate income when you begin withdrawing funds in retirement since bonds provide you with periodic interest payments.

You may also want to consider lower-risk investments like money market funds at this stage of your investment life.

Strategy 2: Take Advantage of Catch-up Contributions

Starting at age 50, you become eligible to make catch-up contributions to your 401(k) or IRA. In 2025, you can contribute an additional $7,500 to your 401(k) for a total contribution of $31,000. In 2026, you can contribute an extra $8,000 for a total contribution of $32,500.

In 2025, the catch-up contribution for an IRA is an additional $1,000 for a total maximum contribution of $8,000. In 2026, you can contribute an extra $1,100 for a total of $8,600.This allows you to stash away even more money for retirement.

Strategy 3: Consider Downsizing

Your kids may be out of the house now, which can make it the ideal time to cut back on some major expenses in order to save more. You might want to move into a smaller home, for instance, or get rid of an extra car you no longer need.

Think about what you want your retirement lifestyle to look like — lots of travel, more time for hobbies, starting a small business, or whatever it might be — and plan accordingly. By cutting back on some expenses now, you may be able to save more for your future pastimes.

Investing in Your 60s

Retirement is fast approaching, but that doesn’t mean it’s time to pull back on your investing. Every little bit you can continue to save and invest now can help build your nest egg. Remember, your retirement savings may need to last you for 30 years or even longer. Here are some strategies that may help you accumulate the money you need.

Strategy 1: Get the Most Out of Social Security

The average retirement age in the U.S. is 65 for men and 63 for women. But you may decide you want to work for longer than that. Waiting to retire can pay off in terms of Social Security benefits. The longer you wait, the bigger your monthly benefit will be.

The earliest you can start receiving Social Security Benefits is age 62, but your benefits will be reduced by as much as 30% if you take them that early. If you wait until your full retirement age, which is 67 for those born in 1960 or later, you can begin receiving full benefits.

However, if you wait until age 70 by working longer or working part time, say, the size of your benefits will increase substantially. Typically, for each additional year you wait to claim your benefits up to age 70, your benefits will grow by 8%.

Strategy 2: Review Your Asset Allocation

Just before and during retirement, it’s important to make sure your portfolio has enough assets such as bonds and dividend-paying stocks so that you’ll have income coming in. You’ll also want to stash away some cash for unexpected expenses that might pop up in the short term; you could put that money in your emergency fund.

Some individuals in their 60s may choose to keep some stocks with growth potential in their asset allocation as a way to potentially avoid outliving their savings and preserve their spending power. Overall, people at this stage of life may want to continue the more conservative approach to investing they started in their 50s, and not choose anything too aggressive or risky.

Strategy 3: Keep investing in your 401(k) as long as you’re still working.

If you can, max out your 401(k), including catch-up contributions, in your 60s to sock away as much as possible for retirement. In 2025 and 2026, those aged 60 to 63 can take advantage of an extra catch-up provision, thanks to SECURE 2.0: In 2025, they can contribute an additional $11,250 for a total of $34,750; in 2026, they can also contribute an extra $11,250 for a total of $35,750.

Also, you can continue to contribute to any IRAs you may have — up to the limit allowed by the IRS, which is $8,000 in 2025 and $8,600 in 2026, including catch-up contributions. Just keep in mind that if your or your souse is covered by a workplace 401(k), you can only contribute pre-tax dollars if you stay under certain income thresholds. 

The Takeaway

Investing for retirement should be a priority throughout your adult life, starting in your 20s. The sooner you begin, the more time you’ll have to save. And while it’s never too late to start investing for retirement, focusing on investment strategies by age, and changing your approach accordingly, can generally help you reach your financial goals.

For instance, in your 20s and 30s you can typically be more aggressive since you have time to make up for any downturns or losses. But as you get closer to retirement in your 40s, 50s, and 60s, your investment strategy should shift and take on a more conservative approach. Like your age, your investment strategy should adjust across the decades to help you live comfortably and enjoyably in your golden years.

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