How Much Money Should You Save in 2023?
When the state of the economy causes your daily expenses to skyrocket, it’s all too easy to sidestep your savings goals. We previously covered the conventional wisdom about how much money you should keep in different types of bank accounts, but how does that opinion change when the economy falters ? I spoke with WalletHub analyst Jill Gonzalez about how much money you should be aiming to have in your primary savings account before you start working towards other financial goals.
How to prioritize different types of savings
Last week we looked at how much money you should have in your emergency fund these days (spoiler alert: the traditional rule of thumb could be three to six months of living expenses, but nine months might be a more appropriate target in 2023). In addition to covering basic expenses for a few months, your savings account is a place for longer-term plans like buying a car or planning a vacation.
Of course, there is no universal measure of how much money is allocated to the budget as your official “emergency fund” compared to other types of savings, including retirement . The total amount you should have in your savings largely depends on your goals. At the same time, Gonzalez shares an exemplary strategy. First things first: prioritize your emergency fund . Gonzalez advises that once you reach your emergency fund goal, “anywhere from 10 to 20% of your income should go into savings.” Including retirement accounts.
With these bases, you can also invest your money. Unlike saving, investing comes with a certain level of risk to your money, but the return can be much higher – here’s our guide to figuring out when you should choose saving over investing your money.
Keep saving even when times are tough
Given the state of inflation , labor market uncertainty, and the looming specter of a recession : how should you make saving a priority? Gonzalez says adding to your emergency fund is a good start to building your savings accounts, not only in spite of the current economy, but because of it. In fact, Gonzalez points out that maximizing retirement account contributions is another way to deal with inflation: “High-yielding savings accounts with low or no fees are a great choice now more than ever. Most of them are online accounts and you can open them in no time.” Here is our guide to choosing a high yield savings account .
After all, Gonzalez reminds us that “there’s no such thing as having too much money in savings” as long as you also have investments and other account types, such as a 401(k) or IRA .