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How much of my pay should go to savings?

Mark Bristow avatar
Mark Bristow
- 5 min read
How much of my pay should go to savings?

Whether you earn a salary or run your own business, you need to look over your finances from time to time to make sure what you earn meets your needs and lets you put aside some money for a rainy day. If you find yourself wondering how much you should save up, you may not find an easy answer. However, you can approach the question from a couple of different angles.

You could consider your long-term financial aspirations, such as buying a home, investing in property, or even travelling abroad, and see how much you’d need to make them come true. Alternatively, you could pay your bills, reduce casual expenses, and leave the rest of your income intact as savings. 

Comparing savings strategies

There are several potential strategies to consider when preparing your household budget to accommodate savings.

One popular saving strategy is the 50/30/20 rule, where 50% of your income goes to your Needs (e.g. mortgage or rent payments, food and utilities), 30% goes to Wants (eating out and entertainment) and 20% goes towards savings.

A savings strategy popularised in Australia by a certain investor is to divide your income into different savings account “buckets”. With 60% of your income going to daily expenses, that leaves 10% for splurging, 10% to save towards long-term goals, and 20% put aside for emergencies.

Another savings strategy is FIRE or Financial Independence; Retire Early. This advocates for living frugally and putting as much of your income as possible towards savings and investments with the goal of achieving an early retirement.

Remember that the nature and source of your income may differ greatly from that of family members or friends, and you'll need a unique financial approach. In other words, a savings strategy that works for one household may not be the best option for another household. 

How can I put more of my monthly income into savings?

If you receive a fixed monthly income, budgeting your expenses effectively could help make it easier to increase your savings. For instance, let’s say you are earning $5,000 a month, but you need to pay $1,000 towards utilities and another $1,000 towards your household expenses. However, you are also paying $1,000 in credit card bills each month. This leaves $2000 that could go into savings, but if you examine your credit card bill, you may spot expenses you can avoid and thus boost your savings.

Alternatively, you could think of different ways to save from your pre-tax income, such as salary sacrificing either mortgage payments or personal super contributions, which could help you save on taxes as well. Consider checking with your employer about the expenses you can pay through a salary sacrifice arrangement, and see if that helps you save more overall.

You could also set up a standing instruction to transfer the amount you can safely save to your savings account on the day you receive your salary. Doing so reduces the chances of eating into your savings while also discouraging you from making unnecessary purchases.

How does having a savings account help me save more?

Depositing a portion of your income into your savings account is one way of separating the amount you want to save from the amount you can spend either on necessities or indulgences. You can also grow your savings when the bank pays interest on the amount in the account.

However, you should try not to withdraw money from your savings account where possible so that the funds are available in an emergency. Adding deposits to your savings rather than making withdrawals can, over time, ensure that you have a sizeable pile of cash that can come in handy if you want to invest in property or holiday abroad.

Your choice of savings account is also important, as you could potentially earn more interest in exchange for keeping withdrawals to a minimum or ensuring the account balance is above a minimum amount. You could periodically check for bonus interest rate promotions which can provide a rapid boost to your savings, even if for a short while.

For example, if you deposited $30,000 into a savings account earning 4.90% in interest, even if you made no additional deposits in just one year, your balance may grow by $1506. And if you were making monthly deposits of $1000, over 12 months your balance would grow by an additional $1777 in interest.

Savings rate

Initial Balance

Monthly deposits

Interest earned over 12 months

Final balance










$43,777 Assumes all conditions are met and no rate fluctuations occur. 

Some banks may also offer you digital tools that help you set financial goals and track and adjust your expenses accordingly. Other institutions may assist with financial consultations that can help you balance your expenses and savings and make the most of your income.

Compare savings accounts

Compare savings accounts

Product database updated 22 Jun, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.