How Much Should I Save?

Why Generic Savings Advice Doesn’t Work

(Plus how to identify your own personal targets)

There is so much boilerplate information online, and it’s easy to fall into believing one-size-fits-all advice. You can find articles about why everybody must have $10,000 saved, or 12 months of living expenses, or why you shouldn’t save more than $1,000 until all credit card debt is paid off.

But you know what?

None of that generic advice is relevant to you. An article online (even this one!) cannot tell you what’s right for your financial situation, or how much money you will need to be safe in an emergency. Everybody has different circumstances, expenses, and risk tolerances. That means that everybody's savings needs are just as different.

Specific advice is where one-on-one money coaching becomes important. But in lieu of that, here’s the next best thing: questions you can ask yourself to guide your savings target. As always, we take into account your unique life and needs.

​Here's a list of 5 questions you can ask yourself to help guide your emergency savings target.

​Starting with 3 months’ salary as a baseline, ask yourself the following questions:

​1. Are you in a single- or double-income household? If you're the only earner, your savings needs will be higher because there's no backup income. If you have a partner who also earns, the likelihood of you both losing jobs at the same time is lower, so you might choose to save less.

2. Are you self-employed? If you don’t have a steady paycheck, you might want a higher emergency savings to tide you over during hard times. When Covid hit, most industries saw an immediate downturn. A lot of that has rebounded -- but a lot of business owners saw that having extra in savings was key to making it through the worst months.

3. Be honest...how much could (and would) you reduce expenses in an emergency? If most of your costs are fixed (like housing) you'll need a higher buffer than somebody with a higher ratio of variable expenses (like travel) that are potentially easier to cut. 

For me personally, I know that an emergency is not the time that I want to cut back on all discretionary spending. It’s the time I want to be extra ​gentle with myself, and do the things that aid my mental health (many of which cost money!)

4. What does your backup support system look like? Do you have a side hustle, a rental property, or family/friends who would help you? Backup support varies widely and is an issue of systemic inequalities. But being honest about what support is available to you is an important factor in how much you might need to save.

5. How many people does your income support? If it's just you, you might choose to take a gamble and save less. But if other people rely on you, you might want more saved.

These are just a few of the questions I go through with clients to guide savings targets. There’s nothing that can replace the custom advice you get in money coaching, but I think it'll give a good jumping off point to guide your own decision making and emergency fund target.

Ready to dive into saving your emergency fund? Book an introductory session with Beyond Money today. Our average client adds $8K to savings within three months, and that’s the jumpstart to emergency savings that everybody needs.

XO,
Kate