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Identify the target amount for how much you should have in savings by adding up your core expenses for three to six months.
You can build up your balance by setting up recurring transfers to high-yield savings accounts, cutting expenses and increasing income.
If you already have enough in savings, consider investing extra money.
There is no one-size-fits-all answer to the question of how much money to have in your savings account. The standard recommendation is to have enough to cover three to six months’ worth of basic expenses. But exactly how much that is depends on your lifestyle.
If socking away such a large amount of cash seems daunting, know that with a plan in place, it’s doable. Here’s how to find out what your target balance should be, plus some ways to quickly grow your savings.
Finding your target number
To determine how much you need in savings — or what three to six months’ worth of expenses looks like for you — figure out how much you typically spend on your most important bills. You can start by reviewing recent bank and credit card statements.
» Calculate: Use NerdWallet’s interactive emergency fund calculator to get an exact number
Consider only essential expenses, such as rent or mortgage payments, insurance premiums, loan and other debt payments, and spending on groceries and transportation. You want to have enough in savings to keep up with your most important bills for a few months without needing to add debt. You don’t necessarily have to include contributions to savings or spending on dining out or other entertainment. Assume you’ll drastically cut those costs in an emergency.
Say your core monthly expenses total about $3,000. You’ll want to have at least three times that amount, or $9,000, in savings. For more peace of mind, you could aim for a $18,000 balance, which is six times your monthly expenses.
Having three to six months of expenses saved is a general rule, but you could opt to save more. If you think it would take longer than six months to find a new job if you lost yours, or if your income is irregular, then stashing up to 12 months' worth of expenses could be smart. You might also want to set a higher savings target to allow for optional expenses, such as occasional dining out or entertainment.
Easy ways to grow your savings account
If you don’t have the recommended amount of money in your savings account today, you can take some simple steps to get there. One of the easiest is to look for small ways to reduce optional expenses. For example, if you usually order restaurant food for lunch every day, you could pack a lunch a few days a week. Or for weekend entertainment, consider free, community-sponsored activities. You don’t have to cut everything you enjoy — just make small tweaks to spend less cash.
You could also take on a part-time job or develop a new side hustle for added income.
» For more savings tips, read NerdWallet’s guide on how to make a savings plan
Use recurring, automatic transfers to easily stash what you’ve saved. You can usually schedule these — set them to occur each payday, for example — through your bank’s website or mobile app. That way, you’ll build your savings without much effort.
What is the average savings account interest rate?
The average savings account today earns only 0.06%. At that rate, if you had $3,000 in your account for a year, you’d earn just a few dollars in interest.
On the other hand, if you put that same $3,000 in a high-yield savings account that earns a 0.50% annual percentage yield, it would earn more than $15 after a year. That may not make you rich, but it can help you build your savings balance faster. That interest also earns interest over time, which helps your savings grow even more. This is called compound interest.
Use NerdWallet’s savings calculator to add up how much your own savings balance could grow.
When you have a good reserve fund in checking and savings, and if you’re fortunate enough to have money to spare, you may want to look into ways to earn even higher yields. Certificates of deposit, for example, often earn higher rates than savings accounts, and are an option if you don’t need access to your cash for months or years. Check out NerdWallet’s list of best CDs to learn about current rates.
You could also look into investing. This is a longer-term strategy to grow wealth, but the returns — while often higher than savings account yields — are not guaranteed. Read NerdWallet’s guide on how to invest money to learn more.
The recommended amount of money to have in savings is different for each person. But as long as you make deposits on a regular basis and make sure you earn an attractive interest rate, you can build a savings balance that is right for you.