What is your savings rate and why does it matter?

There are a handful of numbers you should track for your financial health and well-being. A few you might already know about – your credit score and your net worth, for example. But you should also know your personal savings rate.

Your personal savings rate is simply the percentage of your income you save after taxes and any spending is taken out.

Knowing your individual savings rate can help you determine and stick to your savings goals, whether it’s creating a solid emergency fund, contributing to your retirement fund, paying for a child’s college education or saving for a large purchase.

How to calculate your savings rate

To calculate your savings rate, subtract your monthly expenses from your total income after taxes. Then, divide your total possible savings number by your income. Multiply that number by 100. This results in your personal savings rate. But this is an ideal. Adjust the “total possible savings” number down to what you actually save every month to see what your true savings rate is.

Savings rate calculation

Total monthly take home pay – total expenses = total possible savings
Total possible savings / income x 100 = your savings rate

For example, say your take-home pay (that is – your pay after taxes are deducted) is $6,000 per month. After subtracting your monthly expenses, both fixed and variable, you have $2,000 left over. Of that, you save $1,500. Your savings rate would be 25 percent.

What is a good savings rate

What a “good” savings rate is depends on your own personal goals and current financial situation. Many experts recommend saving at least 20 percent of your income – in line with the 50/30/20 budgeting model that says 50 percent of your income should go towards necessities, 30 percent on wants and 20 percent to savings – but that’s not always (or sometimes ever) feasible.

According to the Bureau of Economic Analysis, the average savings rate in the U.S. for January 2025 was 4.6 percent. This was an increase from December 2024’s 3.5 percent savings rate. Still, it’s tough for many people to save anything. Almost 3 in 10 (29 percent) of people have some savings, but not enough to cover three months’ expenses, according to Bankrate’s 2025 Emergency Savings Report. And 27 percent of U.S. adults have no emergency savings at all.

At the other end of the spectrum, people pursuing FIRE (financial independence, retire early), for example, might strive to have a savings rate of 50 percent or more.

So a good savings rate isn’t a one-size-fits-all type of thing. Once you calculate your current savings rate, you can think about your current and future goals and see whether what you’re doing is “good” for you or if you can (or should) increase it.

If you find yourself living paycheck to paycheck, and not saving at all, don’t get discouraged. Start small, save whatever you can and work towards gradually increasing this rate as you can.

Why your savings rate is important

Knowing and understanding your personal savings rate, in addition to just thinking of savings in dollar amounts, can help you reflect on progress toward savings goals and consider ways to improve your spending and saving habits.

For example, it’s one thing to say “I want to save $1,000 per month” but without knowing what percentage that is of your income, you might be aiming too high or too low. Knowing your savings rate can help you adjust goals, and maybe help you build an emergency fund quicker or plan for the future better so you know how much you can save for retirement (and therefore when you can retire).

“If you don’t know your personal savings rate, you can’t increase it,” says Matthew Goldberg, Senior Consumer Banking Reporter at Bankrate. If you’re not budgeting or aware of your savings rate, Goldberg says it’s like traveling to an area you don’t know well without GPS or navigation. You might get lost. Don’t let that happen to you. Calculate your personal savings rate and use it as a guide through your savings journey.

Where to keep your savings

Where you are putting your savings depends on your personal goals and situation, but some options include:

• Traditional saving accounts, high-yield savings accounts and money market accounts: These accounts are good options for emergency funds and other short-term saving goals since the money is easily accessible.
• Certificates of deposit (CDs): These savings vehicles lock up your money for a set term but as a trade-off, they allow you to earn a fixed yield on your initial deposit. These accounts work well for keeping money safe and growing for a future goal, like a big vacation or car purchase.
• Retirement accounts: A 401k and IRA are two good options for your retirement savings. For example, you can contribute pre-tax money to a 401k lowering your tax liability and potentially take advantage of free money from your employer in the form of a match.

How to improve your savings rate

Regardless of your current savings rate, there are ways you can increase your number.

• Prioritize savings, and pay yourself first. Don’t wait until the end of the month to see what you have left after your fixed and variable expenses. Create a realistic budget based on your monthly income and typical expenses. Calculate how much your monthly savings goal should be based on this.
• Automate savings, when you can. If you can automatically set aside a certain amount of your paycheck, you can take a little effort out of savings. You may be able to split a portion of your paycheck directly into a savings account with direct deposit. You can also schedule automatic transfers between a checking and savings account. Some checking accounts also come with “round-up” features, which will round-up purchases to the nearest dollar and send the difference to your savings account.
• Find ways to decrease spending. Though it’s often not the easiest, especially when living paycheck-to-paycheck and if inflation isn’t working in your favor, try finding ways to decrease spending. Consider cost-cutting measures, such as cutting back on subscriptions or shopping around for a cheaper cell phone plan, internet or car insurance.
• Find ways to increase income. If you have time for it, consider a side gig, such as food delivery or dog walking. You can use cash back credit cards responsibly, paying for essential items such as groceries and your cell phone bill, and paying off the entire balance each month (so you’re not paying interest). When you do shop, check cash back sites, like Rakuten, and earn back some of your purchases.

Bottom Line

Your savings rate is the percentage of your income that you’re setting aside for savings. Knowing your savings rate can help you determine if you are on track to meet your retirement and other savings goals. Regardless of how much you can save, always strive to make saving money a priority.