What's a Good Savings Rate?

Your savings rate is the share of your income you don’t spend. There’s no single right number, but two rules of thumb are widely used: the 50/30/20 budget sets aside 20% of after-tax income for savings and debt repayment, and Fidelity, an investment firm, suggests saving at least 15% of pre-tax income for retirement, counting any employer contribution. Any positive rate means you’re spending less than you earn; a negative one means savings or debt are covering the gap.

This article is general information, not financial advice.

How to Calculate It

savings rate = (income − spending) ÷ income

Someone bringing home €4,000 a month and spending €3,400 saves €600, a savings rate of 15%. The calculation is simple; the choices behind it are not:

• Before or after tax. The US Bureau of Economic Analysis’s personal saving rate, the national figure, is saving as a share of disposable income, what’s left after taxes. Fidelity’s 15% is of pre-tax income. The same household has a lower rate on the larger, pre-tax base, so compare like with like.
• Money taken out before it reaches you. Retirement contributions deducted from your pay are saving, but if you only look at what lands in your bank account, they’re invisible: your rate looks lower than it is.
• Moving money isn’t spending. A transfer to your own savings or investment account is saving. Counting it as spending makes your rate look worse; counting a transfer in as income makes it look better than it is.
• Paying down debt. The 50/30/20 budget puts paying down debt in the same 20% as saving, since both raise your net worth. A savings rate built from cash flow counts repayments as money out.

What Counts as Good

• Rules of thumb. The 50/30/20 budget puts 20% of take-home pay toward savings and debt. Fidelity’s 15% is a target for retirement alone, and Fidelity says your own may vary with when you plan to retire, when you started saving, and how much you’ve already saved.
• Your situation. A higher rate makes sense when your income is irregular, when you’re building an emergency fund, or when you started saving late. A lower one may be all that’s possible on a tight income, and a small positive rate is still progress.
• Direction. One month says little: an annual bill or a bonus swings it widely. A rate averaged over several months, and how it moves, says more than any single figure.

Following It in Kaizora

Savings Rate is derived on Transactions each day from your Income and Spending over the 91 days ending that day: income less spending, as a share of income, with no value when there was no income. Transactions in the Transfer category, money moved between your own accounts, are left out of both, so moving money to savings doesn’t count as spending, and a refund counts as income. Amounts in different currencies convert at each one’s own date’s exchange rate. Since it’s built from your transactions, it sees what reaches your accounts, so contributions taken from your pay before it arrives aren’t in it. It’s a component of the Kaizora Financial Health Score, which gives it full points at 20%. A reference range or a habit on it, set in percent, flags the days it falls below what you choose. See Importing Bank Statements (CSV).

The Short Version

• Savings rate is income minus spending, as a share of income.
• Say whether it’s before or after tax, and count transfers and payroll contributions consistently.
• 20% of take-home pay (50/30/20) and 15% of pre-tax pay for retirement (Fidelity) are common targets, not rules.
• Watch the average over months, not a single month.

Sources

• US Bureau of Economic Analysis, Personal Saving Rate.
• Fidelity, How much should I save for retirement?