It’s not easy to generalize about how much money you should save, because it depends on so many personal factors. To start figuring it out, ask yourself these questions:
What is your standard of living? How much money is enough for you? How much do you earn? At what age do you want to retire? And how much do you want to have saved by then?
Here’s a blog post with a detailed look at how much money you need to live.
There are different types of savings, for example, your emergency fund and your fun budget. In this blog post, ‘savings’ as a standalone term specifically refers to your pension.
Your emergency fund refers to money put aside for real emergencies in everyday life. And by fun budget we mean non-essential larger purchases for which you also have to save.
Your emergency fund is meant solely for unexpected occurrences that you need to be prepared for. Examples include losing your job, your car breaking down, or your washing machine causing water damage.
Common wisdom suggests that between three and six months salary is about right for your emergency fund. This gives you peace of mind and ensures that unexpected expenses don’t eat into your savings.
That's really up to you. Your fun budget can be as generous as you wish, and will allow for larger purchases that exceed your everyday expenses, like a vacation or a new TV. For this, you usually need reserves, as the price tag is higher than what can be covered with your regular income.
Although you save for such treats, most people keep the money in a current account so it can be accessed quickly – and for this reason your fun budget can be thought of as surplus rather than savings.
The goal of saving for your retirement, however, is usually to provide enough money for old age. Here everyone has their own individual goals: Some want to be financially free; others simply want to add a buffer to their pension.
Have you ever thought about how much money you want to have in old age? This is the first important question you should ask yourself to know how much money you should save now.
This is where the whole thing gets a lot trickier, as most people do not know how much money they want to have available when they retire.
In addition, no one can tell in advance how old she or he will get, so we don't know when exactly we’ll start living from our savings nor how long they will have to last. That’s why it’s better to be generous when planning your retirement savings.
Your should aim to maintain at least your current standard of living in old age. Of course, it would also be great to retire before the statutory retirement age.
So how much money should you save? In general, it is assumed that you’ll need 80% of your monthly income when you are old.
With Biallo's supply gap calculator, you can calculate rough estimates of how much money you'll need to close your pension gap.
Once you have calculated this amount, you know how high your pension gap will be and how much money you need to add each month.
The next step is to calculate how long after your retirement your own savings should last. Ten, 20, or 30 years? Then you multiply the sum of your pension gap by 12 and with the number of years that the saved money should last.
(Sum of your pension gap * 12 * x years)
This will give you an estimated total amount you should save until you reach your retirement age. In the next step, you can then calculate how high your savings rate per month must be in order to reach the total amount.
Based on your net income, your savings rate should be at least 10% (ideally 20% or more) per month. Apps like Zuper can help you see what you spend your money on and where you can save.
For everyday saving tips, check out our 50 smart saving tips.
In addition, invest your money profitably. Money that sits in your current account will lose value through inflation.
The sooner you invest your money, the more time it will have to multiply. The higher the return on your investment, the more wealth you can accumulate or the less money you have to save for the same asset.
Save as much as you can and invest the money you’ve saved so that it gains more and more value. Start saving as soon as possible. The sooner you start saving, the less you have to put away overall, as the saved money has more time to multiply.