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Created on 11.07.2019

How much money should I save per month?

Everyone knows that in a perfect scenario, you wouldn't spend all your salary but would put some money aside each month. But precisely how much is “some money”? If feasible, what percentage of my income should I save?

Saving – why do it?

There are many good reasons to put some money aside each month. For one thing, here in Switzerland we have to pay our annual taxes and our monthly health insurance contributions from the salary we receive. This is different to the situation in other countries, where taxes and health insurance contributions are deducted directly from your salary. Unfortunately, salaries in Switzerland do not correspond to the monthly budget that is actually available. Another thing to consider is that unexpected expenses often arise. These can include high medical bills or unexpected repair costs for the washing machine. On these occasions, it is advisable to have something put aside. And perhaps there is something special you want to save money for.

Tip

A study by Money Meets showed that people who have a financial buffer have fewer worries and fears. So saving money is not only a financial benefit, it also makes us happier.

How much money should I save?

Now ask yourself exactly how much of your salary you should save. It is a good idea to differentiate between reserves for mandatory expenses and actual savings. Mandatory expenses include taxes, third pillar contributions and reserves for unexpected expenses. This money is put aside for a short time but is needed again relatively quickly. Actual saving means putting money aside for a longer period. Either to fulfil a wish or as an investment.

The reserves needed for mandatory expenses are relatively easy to calculate. Tax calculations from the previous year plus the maximum contribution for the third pillar divided by twelve months gives the monthly amount. Contributions towards unexpected expenses can also be worked out from recent years. This means you can avoid a situation where expensive bills are impossible to pay. How much to put aside each month for unexpected expenses depends a great deal on how much you earn – and which expenses could arise.

Saving is a challenge!

When we talk of actual saving, many people face a challenge. How much money should I save? Is 10% of my income sensible? There is no single answer. Each individual must consider their own personal situation. But there are always savings strategies that can be applied. One of these is the “pay yourself first” strategy. This savings strategy places as much importance on saving as on paying bills and this ensures that you actually save something every month. You pay yourself first and then deal with other expenses. For this strategy to work in reality, a fixed savings amount must be defined in advance that is then paid regularly.

Another strategy: transfer 10% of your income directly by standing order to your savings account as soon as you receive your salary. If you do this, you won’t be tempted to spend this money on other things. And the “10% strategy” takes into account changes in income, such as when your salary increases, so you automatically save more when you earn more.

Tip

Transfer the defined amount as quickly as possible after your wages are paid, ideally with a standing order. That way, you are sure to save the money and won't be tempted to use it for other things.

Do savings goals make sense?

We all have dreams that could come true if we had enough money. These could be specific occasions such as a wedding or a dream holiday. Or retirement provision, owning a house or buying a car. Now ask yourself how much money you need to make your wishes come true and when the money needs to be available. To make wishes and dreams come true, the ideal scenario is to make a plan and set yourself concrete savings goals. These help you to save. If I have a defined goal, I need to specify the precise amount and the schedule. This clarifies how much I have to put aside each month to make my wishes come true. It’s simpler and feels easier to save for a goal than to put money aside “just because”. Motivation is much greater when I know that I'm saving for my wedding or my car.

Now you know how, when and how much money you can put aside to gradually build up a good amount of savings. This can be over the long term for old age or in the short term to fulfil a dream. Find out how to save for old age in the article “It doesn't have to hurt: smart saving for pillar 3a”.

Find further inspiration for saving in the article “Advice on saving – the best savings tips”.

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