How much money should I have in savings?

Building your savings is a lifelong project, but now is an excellent time to start. Knowing how much to put away will depend on where you are in your life, your income, lifestyle and both your current and long-term financial goals. With this step-by-step guide, learn how (and how much) to save so you can feel confident knowing you’ve socked away enough in your 20s, 30s, 40s, and beyond.

Have you been wondering, “How much should I have in savings?” Before you can know how much money to save and where to put it, you first need to decide what you’re saving for. Start by writing down specific goals.

Some examples might include:

• Get a new smartphone
• Buy a car
• Have the down payment for a home
• Take a vacation
• Go back to school
• Have money for retirement

Understanding the priorities and time frames for each goal can help you determine how to approach saving for them. 

Did you notice that your savings goals have different timelines? Some are short-term (buying a smartphone), while others are medium-term (taking a vacation) or long-term (having enough money in retirement).

Short-term goals generally take 1-2 years to reach. Long-term goals can take 6 years or more. Medium-term goals are about 3-5, depending on whether that vacation is a long ski weekend or a Roman holiday.

When you create a timeline for these goals, you see which ones take priority. This doesn’t mean you should ignore long-term goals. You just might put less money into them now to save for the more immediate. The Financial Consumer Agency of Canada has created this handy worksheet to help you organize.

Once you've got a clearer picture, calculate the cost of each goal and build a payment plan. For example, saving $30,000 for a new car within five years means putting aside $6,000 per year, or $500 monthly.

A budget is a spending plan that aims to balance income and expenses to help you live within your means. By creating your own budget, you can see how much you can afford to put away every month. You can also get help with real-time money management, including budgeting, with Scotia Smart Money by Advice+.*

There are also two smart savings tools by Advice+ that you can use to help reach your savings goals, available on the Scotiabank mobile app. These tools can help you reach your goals by automatically moving small amounts of money into your savings account (you will need to have both an eligible Scotiabank chequing account and the Money Master Savings Account). You can only enrol in one of these tools at a time: 

1. Pay Yourself First is a tool that helps you set up automatic transfers from your eligible recurring deposits like payroll¹, right into your Money Master Savings Account. You set the amount or percentage, and this tool monitors your spending patterns, expenses and incoming funds and then moves money when it appears you can afford it.² The tool won’t ever transfer more than the maximum amount or percentage that you set up. Another benefit is an ongoing interest rate boost³ on top of the regular interest rate⁴ you receive on your Money Master account.
2. Savings Finder is a tool that looks at your source of income and cash flow to find ways to save small amounts here and there from your chequing account into your Money Master Savings Account when it appears that you can afford it.⁵ You set the monthly savings target and Savings Finder will do the rest. The Savings Finder will never transfer more than the target that you set.  Like with the Pay Yourself First tool, you will receive an ongoing interest rate boost³ on top of the regular interest rate⁴ you receive on your Money Master account.  Learn more here.

Some people budget using the 50/30/20 rule. Each month you put 50% of your income towards living expenses like housing, bills, and groceries, 30% to discretionary spending (ex. clothes, entertainment, dining out) and 20% to savings or debt repayment. Make it easy on yourself by adding your savings goal as a line item in your budget, so you know exactly how much to put away every month. Use Scotiabank's Money Finder Calculator to see where you can cut costs so you have more to put away.

An emergency fund should be at the top of your savings’ priority list. This money covers unexpected expenses like taking a pet to the vet, repairing your car, or even losing a job. Having that extra cash put aside will help make those already stressful situations feel more manageable.

Ideally, you should have enough money to cover three to six months' worth of expenses. Add up those monthly expenses and multiply the total to see how much you need to fill that cushion.

It can be tempting to put off saving for retirement, but the longer your money is invested, the more it can grow.

There's no magic number for how much to save for retirement, but there are some common approaches to consider.

One general rule is to put away 5% to 15% of your gross (pre-tax) income every month. If you have to put away less, that's fine. You can boost your contributions later, when you might be earning more.

Some people aim to have 70% of their annual salary available for retirement. For example, if you made $100,000 when working, you’d aim to have $70,000 saved for every year of retirement.

The numbers in this table give you a rough guide to the amount you may want to have saved by age and stage from your 20s to your 60s.

Use these approaches as guidelines but remember that retirement is extremely personal. A Scotia advisor can help you make a retirement plan that suits your circumstances.

The answer will depend on your financial goals, savings time frame and risk tolerance. 

You should use a savings account for emergency savings because it lets you access your funds quickly and on demand. Consider a high-interest account to maximize growth.

A Guaranteed Investment Certificate (GIC provides a safe way to invest your money where your deposit (the principal) is always 100% guaranteed. Choosing the right GIC depends on your financial situation, your investment objectives, and how long you plan to keep your money invested. For example, cashable and redeemable GICs are the most accessible because they offer the flexibility to redeem your investment anytime.

Registered accounts are excellent options for your medium and long-term savings goals. Use a Tax-Free Savings Account (TFSA), and your earnings are tax-free. Registered Education Savings Plans (RESPs), First Home Savings Accounts (FHSAs) and Registered Retirement Savings Accounts (RRSPs) are designed to help you save for post-secondary education, buying a first home and retirement, respectively.

The Bank of Canada changes interest rates depending on a variety of economic factors. In general, higher rates mean you'll earn more interest.

Your retirement funds are what you will live on after you stop working. Will you move or downsize your home? Do you see yourself travelling? Envisioning the life you want to live after retirement will help you shape how you save.

Use Scotiabank’s simple retirement calculator to estimate the amount you’ll need to save in your 20s, 30s, 40s, 50s and 60s to meet your retirement goals.

Saving money isn't hard when you have a plan. Follow these simple savings steps, and you’ll be on your way to a rewarding retirement (or to Rome, if that’s your goal!) in no time. Need a bit of investment inspo? A Scotiabank advisor can help.