How Much Should I Save Every Month?

Asking how much should I save every month is one of the most common money questions Australians have, and while there's no single number that fits everyone, there are some widely used guidelines that give you a sensible starting point. This guide explains a few common approaches to setting a savings target, walks through a worked example using real Australian dollar figures, and shows you how to use a free calculator to find a number that fits your own situation.

Common Guidelines for How Much to Save

There's no universally "correct" savings rate, but a few widely referenced starting points can help:

• The 20% rule — part of the popular 50/30/20 budgeting guideline, which suggests directing roughly 20% of after-tax income toward savings and debt repayment beyond minimums
• Pay yourself first — setting aside a fixed amount or percentage as soon as you're paid, before spending on anything else
• Goal-based saving — working backward from a specific target (a house deposit, emergency fund, or holiday) and a timeframe to calculate the monthly amount required

None of these are hard rules — they're starting points to adjust based on your income, expenses, debts and goals.

The Method: Working Out Your Own Savings Target

1. Calculate your total after-tax monthly income.
2. List your essential expenses — housing, utilities, groceries, transport, insurance, minimum debt repayments.
3. Subtract essential expenses from income to see what's left for savings and discretionary spending.
4. Decide on a savings goal — a percentage of income, a fixed dollar target, or a goal-based amount.
5. Automate the transfer on payday, so saving happens before discretionary spending has a chance to eat into it.

Worked Example: Goal-Based Saving for a House Deposit

Suppose Liam wants to save a $60,000 house deposit within 4 years (48 months), and currently has $5,000 saved.

1. Remaining amount needed: $60,000 − $5,000 = $55,000
2. Divide by the number of months: $55,000 ÷ 48 = $1,146 per month

If Liam earns $6,500 per month after tax, that $1,146 monthly savings target represents about 17.6% of his income — broadly in line with the 20% guideline, and a concrete number he can automate as a standing transfer on payday.

Comparing Approaches

All three land in a broadly similar range here, which is often a good sign that a savings target is realistic rather than arbitrary.

Try Our Free Budget Calculator

Work out exactly how much you can realistically save each month by mapping out your full income and expenses with our free Australian Budget Planner Calculator. It shows your surplus clearly, so you can decide how much of it to direct toward savings.

Common Mistakes When Setting a Savings Target

• Picking a percentage without checking it against your actual expenses. A 20% target might be unrealistic if your fixed costs already consume 90% of your income.
• Not automating the transfer. Manually deciding to save "whatever's left" each month often results in less being saved than planned.
• Ignoring irregular expenses when calculating what's genuinely left over to save.
• Setting a savings goal with no clear purpose or timeframe. A vague "save more" goal is harder to stick to than a specific target with a deadline.
• Not adjusting the target as income or expenses change. A savings rate that made sense last year might need revisiting after a pay rise or new expense.

How Much to Save at Different Income Levels

These are illustrative starting points only — your realistic target depends heavily on your fixed costs, debts, dependents and financial goals, not just your income level.

Percentage-Based vs Goal-Based Saving

FAQ

Is there a standard percentage I should save each month?

The 50/30/20 guideline suggests around 20% of after-tax income for savings and extra debt repayments, but this is a general starting point, not a strict rule. Your realistic figure depends on your income, expenses and goals.

What if I can't afford to save 20% of my income?

That's common, especially with high fixed costs like rent. Start with whatever amount is realistic, even a small fixed sum, and look for opportunities to increase it gradually as your situation improves or expenses reduce.

Should I save a percentage of my income or a fixed dollar amount?

Both approaches work. A percentage automatically scales with your income, while a fixed goal-based amount (like a house deposit target divided by months) gives a concrete number tied to a specific outcome.

Does how much I should save change with my age?

Broadly, yes — savings priorities often shift over time, from building an emergency fund and house deposit earlier in life to increasing retirement contributions later on. There's no single rule that applies at every age.

How do I stick to a monthly savings target once I've set one?

Automating a transfer to a separate savings account on payday is one of the most effective ways to stick to a target, since it removes the temptation to spend the money before saving it.

Pay Yourself First, Because the Order Determines the Outcome

There are two ways to save. You can spend, then save what remains. Or you can save, then spend what remains.

These sound like the same equation rearranged. They produce very different results, because the amount left at the end of a month is not a fixed quantity — spending expands to fill whatever is available. Saving what is left over reliably produces small and inconsistent saving.

Transferring a fixed amount on payday, before any discretionary spending occurs, converts saving from a residual into a fixed cost. It is the single change that most reliably moves people from intending to save to actually saving, and it requires no additional income.

Sequence Your Goals Rather Than Funding Them All

Attempting to build an emergency fund, save a house deposit, and make extra debt repayments simultaneously spreads a limited amount so thinly that no goal is reached, and the lack of visible progress is what causes people to stop.

A more effective approach is to sequence, with a common ordering being roughly as follows.

1. A small starter emergency buffer, sufficient to cover an unexpected car repair or excess. Without it, any setback goes onto a credit card and undoes everything.
2. High-interest debt. Clearing a debt costing a high rate is a guaranteed return equal to that rate. No savings account competes with it.
3. A fuller emergency fund, commonly framed as three to six months of essential expenses, and larger where income is irregular or a household depends on a single earner.
4. Goal-based saving for a deposit, and longer-term investing.

The right sequence depends on your circumstances, and the ordering above is a common starting point rather than advice.

Why the Percentage Matters Less Than You Think

Guidelines such as saving twenty per cent of income are useful for orientation and are frequently unachievable for people renting in expensive Australian cities — and equally, unambitious for people with high incomes and low fixed costs.

What actually determines the outcome is the gap between what you earn and what you spend, sustained over time. Two people saving the same percentage of very different incomes are doing entirely different things. Two people saving different percentages of the same income may reach the same place if one has lower fixed costs.

This page provides general information only and is not financial advice. For guidance specific to your circumstances, speak with a licensed financial adviser.

Conclusion

There's no single correct answer to how much you should save every month, but guidelines like the 20% rule and goal-based calculations both give you a realistic starting point. The key is checking any target against your actual income and expenses, then automating it so saving happens consistently. Map out your own numbers with our free Australian Budget Planner Calculator.

Note: Savings guidelines mentioned above are general in nature. For personalised advice, consider speaking with a licensed financial adviser, and check Moneysmart for further budgeting guidance.

Related reading: Family Budget Planner Australia, Beginner Budgeting Guide Australia, Emergency Fund Calculator Guide