One of the most important decisions you will make over your lifetime is how much of your income to save. A great opener to ask your students who have had jobs is “What percentage of your pay have you saved?” Student responses will make it clear that this is a very personal decision and driven my a multitude of factors. Why not give your students five minutes to find out what other experts are saying about the “ideal savings percentage.”
Here is a sampling of articles that I uncovered:
- Get Rich Slowly: “But then Updegrave gives a great answer, which boils down to: Do what works for you. There is no right answer to this question. Each of us is in a different situation, and while it might be financially responsible for me to save 20% of my income, for you that number might only be 5%. Updegrave says that it’s not important what percentage of your income you save, but that you develop the habit. Build an emergency fund. Develop a retirement savings regimen. When you’ve done these two things, look for a additional ways to save. Most of all, he says, don’t make excuses. We all have things we’d rather spend our money on; if your goal is to be financially responsible, make saving a priority.”
- Appleton Post Crescent: “Today, depending upon whom you ask the rule-of-thumb advice might be to save 15 percent, 20 percent or even 25 percent of your income for retirement. If you are determined to live frugally or have a large disposable income, you may be able to save 15 percent or more of your pre-tax income…These percentages are general guidelines and one size doesn’t fit all. People with higher incomes usually save more. People earning $35,000 or less save an average of 3.7 percent of their income and people earning $100,000 or more save an average of 10.4 percent of their income.”
- Investopedia: “There’s no way to accurately forecast your retirement needs since nobody knows what their future holds. However, educated assumptions based on historical data yield fairly clear benchmarks. Aim to save 16% of your annual salary if you’re early in your career. If you make $50,000 per year, save $8,000 per year or about $666 per month. A tough task? Maybe. But if your employer is matching your savings, that $666 could be $333 if the company matches your contributions dollar for dollar.”
- Huffington Post: “In an interview with CBS News, financial expert David Bach said that people should save one hour’s worth of income every day (that’s 12.5 percent of your gross pay). Most people only save 4 percent of their income — just about 20 minutes of work. The trick is to start slow…”Split your direct deposit so that an amount or a percentage goes directly into your savings account before you can spend it. Or, set up an automatic transfer for each payday, regularly sending money from your checking account to your savings account. This can help you get used to managing living expenses with what looks like a smaller paycheck, when actually you’re building up your own savings.”
- Learnvest: “According to the 50/20/30 rule, you should consider dividing your monthly budget into three distinct categories of expenses: 50% should be reserved for essentials (think housing and food), 30% should be allocated for lifestyle choices (things like nights out and 121 channels of cable) … and at least 20% should go toward what we call “financial priorities,” which can include debt payments, retirement contributions and, of course, savings.”
- Globe and Mail: “The answer to the question of how much one should be saving is often seen as a non-answer: It depends. A financial plan will help find your number, but until you get one, the greater plan would be 10 per cent or “as much as you can.” And then, maybe just a little more.