If you have made the decision that it would be good to save up some money or if you do already have some savings, you may wonder how much money you should actually aim to have saved up. It is not an easy decision really as people will have different opinions on this. There are different approaches as well and it can be worth thinking about a few of these so that you will be able to make a decision more easily.
How Much do I Need?
The first thing that many people will focus on is how much money they need to save up. This is because they will want to think about whether they will have enough. You will need to think about what the purpose of saving is for you. If it is to have some money for emergencies then it might need to be enough to cover a month’s rent, to replace a broken washing machine or to have a car repair. Consider costs of emergencies like this and how much you will therefore need. It can be wise to think about the fact that you may need to replace several things at once or you may not have time to replenish the savings very quickly after paying out so it could be good to have a bit extra.
Some people want to have a lot more money. Some will be saving for retirement, for a deposit on house purchase or in case they lose their job. These amounts will be bigger but it is still possible to come up with some figures. For example, you can work out how much you need for retirement by calculating what you pay out at the moment and thinking about whether that will change. You should be able to find out how much pension you will be entitled to from the government website and your pension provider. This will help you to calculate how much more money you might need. Saving for a deposit takes a little guesswork because you will not be exactly sure how much the house you are buying will cost, but it is a good idea to make sure that you have more than enough by looking at house prices on homes you are interested in and finding out how much lenders will expect you to provide by way of a percentage. For losing a job, it could be worth putting by a good few months worth of money. You may be able to get benefits, but it can take time to get those organised and they will not be very much. Therefore, it can be a good idea to have some money available to use just in case.
How Much Can I Afford to Save?
You will also need to contemplate how much you can afford to save. This will obviously be determined by how much you earn and how much you spend. If you always have some money left at the end of the month then this can easily be saved. If you do not, then you might have to think about whether you will be able to find a way to get some extra money. It could be that you will have to cut back on spending, try to pay less for what you buy or earn more money. It is wise to think about some ways that you can find some extra money so that you can pop some into your savings account. It can be a good idea to look back at some bank statements to help you with this.