Is There a Right Percentage of Income to Save?
There is no single percentage of income that everyone should save.
Figures such as 10% or 20% can be useful reference points, but they are not financial requirements. A percentage that is comfortable for one household could be unrealistic for another, while someone else may be able to save considerably more.
A saving percentage is most useful as a planning tool.
It gives you a consistent way to relate the amount you save to the income you have available. If your monthly take-home income is £2,000, for example:
5% = £100
10% = £200
20% = £400
The calculation is straightforward. Deciding which of those amounts makes sense is the more important part.
Your essential expenses, existing financial commitments and savings goals can all affect what is realistic. The amount also needs to be considered in pounds: a particular percentage does not tell you whether you are putting aside enough to reach the goal you are saving towards.
This is why 20% should not automatically be treated as better than 10%, and 10% should not automatically be treated as better than 5%.
The useful question is:
What percentage produces a saving amount that your finances can support and that makes appropriate progress towards what you are saving for?
If you want to start with the amount your monthly finances can realistically support rather than a percentage, How Much Should You Save Each Month? looks at that decision in more detail.
Why Is 20% So Often Recommended?
The idea of saving 20% of your income is often associated with the 50/30/20 budgeting framework.
In its simplest form, the framework divides income into three broad categories:
- 50% for needs;
- 30% for wants;
- 20% for savings and other financial priorities.
Its appeal is easy to understand.
Rather than deciding how every pound should be divided from scratch, the percentages provide a simple framework for balancing current spending with longer-term financial priorities.
The percentage also moves with income. If the income being divided increases, the amount represented by 20% increases as well.
But the framework does not mean that everybody has enough financial room to save 20%.
Two households could have exactly the same take-home income but very different housing costs, transport expenses, family responsibilities, debt commitments and other essential costs.
One may comfortably have 20% available after meeting those commitments. The other may not.
This distinction also works in the other direction.
If you can comfortably save more than 20%, there is no reason to treat 20% as a maximum simply because it appears in a budgeting framework.
A benchmark can help you assess your position. It does not determine whether your saving is right or wrong.
Should You Use Gross or Take-Home Income?
If you are using a percentage to decide how much to save from your monthly income, take-home income is generally the more practical starting point.
This is the money that actually reaches you after deductions from your pay.
Suppose someone earns a gross salary of £36,000 a year.
Dividing that figure by 12 gives £3,000 a month, but that does not mean £3,000 reaches their bank account each month. Income Tax, National Insurance and potentially other deductions affect the amount actually available for spending and saving.
Using the £3,000 gross figure to calculate a monthly savings contribution could therefore give a misleading picture of what their everyday finances can support.
If £2,000 actually reaches your account each month, the percentage calculation becomes much more practical:
10% of £2,000 = £200
20% of £2,000 = £400
You can then compare £200 or £400 with the money required for housing, bills, food, transport and your other financial commitments.
This does not mean that every reference to a savings percentage uses take-home income.
Savings rates in financial statistics, pension discussions and other contexts can be calculated using different definitions of income. The important point is to check what the percentage is being calculated from before comparing it with your own.
For the practical examples in this guide, we use monthly take-home income because it represents the money available for everyday spending and saving.
What Do Different Saving Percentages Mean in Pounds?
Percentages can sound abstract until they are converted into actual contributions.
Using monthly take-home income of £2,000 makes the difference easy to see.
These examples show the contributions alone and do not include any interest that might be earned. £100 £1,200 £200 £2,400 £300 £3,600 £400 £4,800 A higher percentage increases the amount being saved, but it also increases the amount that has to come from the same monthly income. The highest percentage is therefore not automatically the most appropriate one.Saving Percentages on £2,000 Monthly Take-Home Income
5%
10%
15%
20%
Moving from 10% to 20% doubles the monthly contribution from £200 to £400.
It also means that another £200 is no longer available for everything else that month.
That may be perfectly manageable for one person and unrealistic for another.
The percentage therefore needs to be considered from both directions:
How much would this allow me to save?
and
How much income would I have left after saving it?
The amount in pounds is ultimately what has to fit alongside the rest of your finances.
Is 10%, 20% or Another Percentage Enough?
There is no percentage that can be described as universally “enough”.
Whether a contribution is enough depends partly on what you need the resulting money to achieve.
Consider 10% and 20% of the same £2,000 monthly take-home income.
Saving 10%
A 10% saving rate would mean putting aside £200 a month. Over one year, the contributions would total £2,400 before allowing for any interest.
Saving 20%
A 20% saving rate would mean putting aside £400 a month. Over one year, the contributions would total £4,800 before allowing for any interest.
Saving 20% produces twice the contributions, but it also requires twice as much of the same monthly income. Whether 10%, 20% or another percentage is appropriate depends on both affordability and what the savings need to achieve.
Suppose your goal is to build £6,000.
Saving £200 a month would take longer to reach that amount than saving £400 a month.
That does not make 10% an inadequate saving rate by itself. It tells you that there is a relationship between:
the amount you want to reach + your monthly contribution + the time available.
You could potentially respond by increasing the contribution, allowing more time or reconsidering the target. Which options are realistic depends on the goal and your finances.
How to Save for a Financial Goal looks specifically at bringing those three parts together.
The same principle applies to percentages below 10%.
If 5% of a £2,000 take-home income is £100 a month, that still represents £1,200 of contributions over a year.
It may be below a commonly quoted benchmark, but the benchmark does not make the £1,200 insignificant.
A smaller sustainable percentage can be more useful than choosing a higher percentage that repeatedly leaves you short elsewhere.
If there is very little room available after your essential expenses and commitments, How to Save Money When Money Is Tight looks more closely at building savings from smaller affordable amounts.
There is no special significance to 20% at the other end either.
Someone who can comfortably save 25% or 30% does not need to reduce their contribution simply because it exceeds a common budgeting benchmark.
Percentages are not financial scores.
Their value comes from helping you understand how much of your available income you are directing towards savings.
Should You Save a Percentage or a Fixed Amount?
You do not have to use a percentage at all.
Some people may find it easier to decide that they will save a fixed amount each month, while others may prefer a percentage that relates directly to their income.
Both can provide a useful structure.
The two approaches organise your contribution differently. Neither is automatically better.
If you save 10%, the amount changes when the income used for the calculation changes. This can make the contribution naturally responsive to changes in earnings.
Saving a set amount such as £150 each month can make the contribution straightforward to plan, particularly when your income and expenses are relatively predictable.
The most useful method is generally the one that produces a realistic contribution and makes it straightforward to understand what you are putting aside.
Percentage vs Fixed-Amount Saving
Percentage of Income
Adjusts with income
Fixed Amount
Predictable contribution
You can also combine the two approaches.
Suppose you calculate that a suitable percentage of your take-home income produces a contribution of £187 a month.
There is no need to transfer exactly £187 simply to preserve the percentage.
You might decide that £185 or £190 is a more convenient fixed contribution.
The percentage has helped you identify the approximate amount, while the fixed contribution makes the saving plan simple to manage.
A percentage can become particularly useful when income changes because the contribution can move with it.
However, irregular income introduces other considerations. A lower-income month may still contain many of the same essential expenses as a higher-income month, so simply applying the same percentage to every payment does not necessarily solve the problem.
How to Save When Your Income Changes Each Month looks specifically at saving when earnings are less predictable.
Should Your Saving Percentage Stay the Same?
Your saving percentage does not need to remain unchanged indefinitely.
The amount that fits your finances today may become easier or harder to maintain as your circumstances change.
An increase in income could create more room for saving.
A regular expense ending could have a similar effect. For example, finishing a debt repayment or another temporary commitment may release money that can potentially be redirected.
The opposite can happen too.
Higher housing costs, childcare, a reduction in income or another significant expense could make the existing percentage more difficult to maintain.
Your savings goals can also change.
You might temporarily save a higher amount while working towards an important target, then reconsider the contribution once the target has been reached.
Or you may simply redirect the same contribution towards another goal.
The useful principle is:
Review the percentage when something meaningful changes rather than treating the original figure as permanent.
That review does not always need to result in an increase.
If your financial room has reduced, a lower percentage may be more realistic. If it has increased, you can decide whether some of that additional capacity should go towards savings.
The objective is to keep the contribution relevant to your actual finances and goals, not to make the percentage continually move upwards.
How Can You Choose a Saving Percentage That Actually Fits?
Rather than beginning with the assumption that you need to save 10%, 20% or another commonly quoted figure, you can work from your finances towards the percentage.
A Practical Way to Find Your Saving Percentage
This approach starts with the money actually available rather than forcing your finances to fit a predetermined benchmark.
-
Start with take-home income
Identify the income that actually reaches you and is available for your everyday spending, commitments and saving.
-
Account for essential costs and commitments
Consider housing, household bills, food, transport, required repayments and other important costs before deciding what financial room remains.
-
Choose a realistic amount in pounds
Work out an amount you could put aside without making essential expenses or other important commitments difficult to manage.
-
Convert the amount into a percentage
If you take home £2,000 a month and £150 is a realistic contribution, £150 ÷ £2,000 × 100 gives a saving rate of 7.5%.
-
Test the contribution against the goal
Consider whether £150 a month is likely to achieve what you need within a realistic timeframe. If it does not, you can consider whether the contribution, target or timeframe can reasonably change.
The percentage can describe a realistic saving contribution rather than dictate one. In this example, 7.5% is more informative than assuming the contribution must first reach a general 10% or 20% benchmark.
This reverses the way saving percentages are sometimes presented.
Instead of:
“I should save 20%, so how do I make £400 fit?”
you are asking:
“What can my finances realistically support, and what percentage does that represent?”
You can then consider whether that amount makes appropriate progress towards what you want your savings to achieve.
If £150 a month is affordable but does not reach your target quickly enough, that does not automatically mean you should force the contribution higher.
You might have several options.
The target could potentially change. The timeframe could be extended. Your contribution might increase later if your finances have more room. Or you may decide that the original goal remains important enough to justify redirecting some flexible spending towards it.
That is a more useful decision than judging the 7.5% figure against an arbitrary benchmark.
If the difficult part is establishing what your monthly finances can genuinely support, continue with How Much Should You Save Each Month?.
If you already have a specific amount and date in mind, How to Save for a Financial Goal can help you connect the target, contribution and timeframe.
Conclusion
There is no single percentage of income that everyone should save.
Figures such as 10% and 20% can provide useful reference points, and the 50/30/20 framework helps explain why 20% is so commonly discussed. But a benchmark is not a requirement.
For everyday saving, take-home income generally provides the more practical basis for calculating a percentage because it reflects the money actually available to you.
The resulting amount in pounds is what matters.
Saving 20% instead of 10% doubles the contribution, but it also requires twice as much of the same income. A smaller percentage can still build meaningful savings, while a higher percentage can be perfectly reasonable if it comfortably fits your finances.
Your percentage can also change as your income, expenses, commitments and goals change.
Rather than asking whether you are saving the “right” percentage, a more useful question is:
Does this percentage produce an amount that my finances can realistically support and that makes appropriate progress towards what I am saving for?
That is what turns a saving percentage from a general benchmark into a useful planning tool.
