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How much should we save?

Discussion in 'Money Matters' started by pooja, Aug 23, 2005.

  1. pooja

    pooja New IL'ite

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    We all make different amounts of money and hence individual savings might differ among all of us, but is there a rough rule of thumb on how much should we save per month?

    Specifically, what percentage of our salary should we try saving on a monthly basis? My finance is a mess and I am trying to get it in order[​IMG]
     
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  2. roja

    roja Junior IL'ite

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    Save more!

    Hey Pooja,

    Is there any limit to savings? I thought there should only be a limit to spending! The more you save and little you spend, it is better :mrgreen:.
    But I always end up doing the reverse!

    However, I agree we can't have the entire earnings as savings. But I think 25% of the annual earnings if kept as a saving, it is really good.
     
  3. rohini

    rohini New IL'ite

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    Have a goal for savings

    Hi Pooja,

    That's an interesting question - how much should we save?

    I personally feel it is hard to save as cash savings. I have seen it is very human to tend to release our rules for saving and get into spending more. I feel inorder to really save we need to have a goal like buying a house, car, start a small business, etc.

    To do any of the above we get into taking a loan and automatically get into a commitment to repay the loan. That's the best way to save atleast with what I have experienced.

    Good luck, Pooja.
     
  4. uma

    uma Senior IL'ite

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    It depends!

    Pooja-

    We typically save for two reasons.

    1. Savings for unexpected emergencies; mainly health related.
    2. Savings for retirement.

    In the US and other advanced countries with medical insurance, overcoming medical emergencies is less of a problem; but still it is better to save substantial money for your uncovered expenses.

    That leaves you with one reason to save..retirement. How much you save depends on when you plan to retire and what type of lifestyle you would like to have after retirement. With increasing life expectancies, we need to save more than what our parents saved.
     
  5. Roshni

    Roshni Local Champion Staff Member Senior IL'ite

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    Save for your kids

    Hi Pooja,

    I would agree with the other friends here...in terms of how much to save. Save as much possible, that's always best and safe.

    In addition to what Uma has mentioend, I would suggest save for your kids. Like save for their education - these days school education itself turns out much costlier. I remember my parents saved for my college education when I grew up.

    All the best, Pooja.
     
  6. Kitchuppa

    Kitchuppa New IL'ite

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    How much should one save?

    Dear Pooja,
    As you have mentioned there are differences in the saving patterns of individuals but we all should have some rule as a bench mark. If we analyse world level statistics, probably, we Indians stand in the first few ranks on the savings. As an NRI based in gulf, I could realise this. I will briefly explain before we come to the bench marking of savings.
    In every country probably Indians live with a minimum of 1000 local currency per month and anything more than this they try to save at least about 30% of that. Once they reach certain level of standard in their living, their minimum requirement increases in line with their earning still the proportion of their saving is fairly maintained.
    Thus as per my calculations every one is capable, and must be capable of saving atleast 30-40% of their income. This can be done even by persons who do not have proper control on their expenses, by committing the loan towards housing etc., so that they will have a consistent saving.
    Dr.Tamilvanan, the great writer of Tamil nadu gave tips to all regarding saving pattern very long back, I read that in one of his books some time during 70's wherein he mentioned 10% as minimum and compusory saving. He used to give a masterlist of expenditure for every slab of society in which he would give everything including having entertainment like cinema.
    So it all depends one's willingness to try and save by following certain pattern of living. We SHOULD GET THINGS WITHOUT WHICH WE CANNOT LIVE AND WE SHOULD AVOID THINGS WHICH ALL WE WANT. I can tell in tamil correctly this: Avasiyamanadhai vangathe! thavirkka mudiyadadhi vangu!
    I think I had made a big reply. :wave
    Kichuppa
    Saudi Arabia.
     
  7. Sriniketan

    Sriniketan IL Hall of Fame

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    there was a discussion on the TV with the very same topic. There the guest gave an account of how much to save.
    If a person starts to earn, say, at the age of 25, he has to save 50% of his age. That is, in this context, he has to save 12.5% of his income. If he starts to earn at the age of 30, then he has to save 15% of it. and so on. He also mentioned that his friend of his, used to buy 1 gram of gold every month which he sets aside from his salary. The savings should be distributed among stock, mutual funds, bank, retirement account, etc. Even if one fails we would be having other sources in handy.
    Moreover, where the salary is not of the monthly type, I think we should calculate, how much we spend and on what items, if it is necessary or what and cut down the expenditure accordingly, which means savings.
    Sriniketan
     
  8. puni88

    puni88 Moderator Staff Member IL Hall of Fame

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    It is very interested topic.
    It purely depends upon your financial status for savings and expenditure.
    Definetly we should save for our future, kids education, make assets, our retirement, health issues.
     
  9. Huma

    Huma Silver IL'ite

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    hi
    i agree with puni

    bye
     
  10. wfsmurthy

    wfsmurthy New IL'ite

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    Hi All,
    This is a very interesting topic. When you say we need to save a percentage of our earnings does our savings like 401K, Life insurance include those??
    As somebody said we shud distribute our savings in Stocks, Property, Gold, Insurance and Mutual funds.
    These days I feel it is wrong to have hard cash as savings as the value of money is reducing soo much. Instead invest in some means.
    Sandhya
     
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