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:

• 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.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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