How Much Should People Save From Each of Their Paychecks?

Everybody knows you’re supposed to save money from each paycheck you earn. But it’s a lot easier said than done. If you’re not saving, rest assured that you’re not alone. According to a recent survey, 69 percent of American adults have less than $1,000 in savings. 34 percent of Americans have zero savings. So, how much should you tuck away from each paycheck? It depends on your income, expenses and goals. However, there are a few general rules you can use as a guide.

TL;DR (Too Long; Didn't Read)

While there is no one rule as to how much you should set aside for savings from each paycheck, 10 to 25 percent is reasonable.

Saving Needs Vary

There is no shortage of savings advice out there. Experts suggest saving anywhere from 10-to-25 percent of your paycheck, although few agree on what the magic number is. Savings rules are helpful but the truth is, every person has different financial needs. If you’ve just graduated college, you may not need to save as aggressively as a person nearing retirement age. If you’re in the late stages of your career and are low on savings, you might want to save a higher percentage from each paycheck.

Before choosing a savings strategy, it’s useful to sit down and figure out your expenses, needs and long-term goals. This will help you make a budget and figure out how much money from each paycheck you’d like to save. Many financial institutions have retirement savings calculators to help you figure out your ideal savings target. This will give you an individualized savings goal based on your age, income, the savings you already have and the year you'd like to retire.

10-Percent Rule

The 10-percent rule is a favorite of financial experts. It’s extremely simple to follow: Put 10 percent of each paycheck you earn in savings. Many experts push this rule even further and say you should save up to 15, 20 or even 25 percent of your income. However, these numbers may not be realistic for people living paycheck-to-paycheck. If you’re struggling to make ends meet, that might mean contributing whatever you can to your savings with the ultimate goal of putting away 10 percent each pay period.

Save What You Can

Ultimately, most savings advice boils down to one thing: Save however much you can. Only you know what’s realistic for you. For some people, saving 10 percent may be a stretch. Others will save 30 percent or more of their income. The bottom line which all experts stress is that saving a little is better than not saving at all. If saving 10 percent or more of your income is overwhelming, focus on saving wherever you can.

Start Small

According to expert financial advisors, one way to reach your saving goals is by starting small. For example, you could start saving by putting away one percent of your paycheck. Then the next month, you'd bump it up to two percent. If you keep building on the money-saving momentum, you will eventually hit your percentage goal. This way, you won’t feel a massive difference in your take-home pay right away.

Split Your Savings

Many financial experts advise splitting your savings into two piles. One pile is for short-term savings, otherwise known as an emergency fund. The other pile is for long-term savings, namely your retirement fund. Fidelity advises saving 5 percent of your income towards your emergency fund and 15 percent of your income towards your retirement. This means you’d save 20 percent of your paycheck total. Regardless of what percentage of your income you’re saving, financial experts say it’s a good idea to split your contribution between short and long-term savings.

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