Personal finance is just that, personal, so there really is no wrong or right answer to the question of how much you should save each month. But here, I’ll break down the sorts of things you things you should consider to come to the right amount for you.
Establishing an emergency fund
An important goal to save towards is an emergency fund. This should be cash savings, so you can access your money quickly in case of emergencies. The aim for an emergency fund is to reach six months worth of living expenses (necessities such as rent and food).
Work out how much you need each month for the necessities to live, then multiply this by six and you have the target goal for your emergency fund! And then you can factor this into your monthly budget.
There is a wide misconception that saving small amounts of money is pointless and so it’s not worth bothering, but saving any amount of money is great because it can really add up over time!
When you save consistently (no matter the amount) you are creating a good saving habit meaning that when you are able to save a higher amount each month, the behaviour for saving is already in place.
Working out how much to save
You can work out how much to save by creating goals to work towards.
For example, say I want to save £1,200 by this time next year. I’d then use this figure to calculate how much I should be saving every month to ensure I hit my goal.
Put simply: £1,200 divided by 12 is £100 per month for 12 months.
When you have created a budget (check out my video on the three steps to get started with saving where I break this down in more detail) and you are deciding how much to allocate towards your financial goals, this simple calculation can be a really useful framework.