It is one of those questions that sounds simple but somehow never gets a straight answer. You type it into Google and get hit with a wall of percentages, vague guidelines, and advice that feels like it was written for someone who already has everything sorted. Not particularly helpful if you are trying to figure out what you should actually be doing with your money right now.
What the Average Person in the UK Is Actually Saving
Before we get into what you should be saving, it is worth knowing what most people are actually doing. According to the NatWest Savings Index, the average person in the UK saves around £226 a month. That sounds reasonable until you realise that figure is heavily skewed by higher earners. A significant chunk of the population is saving far less than that, and a worrying number are saving nothing at all.
The reality is that around 11 million working adults in the UK do not save regularly at all, which leaves them dangerously exposed to any unexpected cost. One boiler breakdown or a month of reduced hours at work and the whole thing comes apart. The average is not necessarily the target. It is just a starting point for understanding where most people are.
The 50/30/20 Rule: A Useful Framework
The most widely used guideline for how much to save each month is the 50/30/20 rule. The idea is straightforward. You split your monthly take home pay into three buckets: 50% goes on essential needs like rent or mortgage, bills, food and transport. 30% goes on wants, things like eating out, subscriptions, holidays and entertainment. The remaining 20% goes towards savings and debt repayment.
So if you take home £2,500 a month, the 50/30/20 rule suggests saving £500. On £3,500 a month that becomes £700. On £2,000 it is £400.
It is a solid framework but it is not gospel. The cost of living in the UK has made the 50% needs allocation very tight for a lot of people, particularly renters in cities. If your rent alone is eating 40% of your take home pay, hitting 20% savings is not realistic right now and that is fine. The important thing is to save something consistently, not to hit a perfect percentage. Even 5% or 10% is infinitely better than nothing and gives you a base to build from as your income grows.
What You Should Be Saving By Age
This is where it gets more specific and more useful. Rather than just thinking about monthly amounts, it helps to have a sense of where your total savings pot should be at different stages of life.
In your 20s, the priority is building the habit and getting your emergency fund sorted. You are unlikely to be earning a huge amount and you may have student loans or rent eating a big chunk of your pay. Saving 10% of your take home pay is a realistic and meaningful target at this stage. Even £150 or £200 a month invested consistently through your 20s will compound into something significant by your 40s.
By the time you hit 30, the benchmark shifts. A reasonable target is to have saved the equivalent of around one times your annual salary. So if you earn £35,000 a year, having £35,000 set aside by 30 is a solid position to be in. Most people are not there, and that is okay, but it gives you a clear number to aim at. From 30 onwards, bumping your savings rate up to 15% or 20% of take home pay starts to make a real difference.
In your 40s the target grows considerably. By 50, a widely used benchmark is having saved around six times your annual salary across pensions, ISAs and other savings combined. That sounds like a lot, and for most people it is a stretch, but knowing the number means you can work out whether you are on track or whether you need to increase your contributions.
The Emergency Fund: Non Negotiable
Before you think about investing or growing wealth, the first savings priority for everyone is the emergency fund. The standard advice is three to six months worth of essential expenses sitting in an easy access account. If your monthly outgoings are around £1,800, that means keeping between £5,400 and £10,800 somewhere you can get to it quickly without penalty or fees.
This is not exciting money. It does not grow particularly fast and it is not going to make you rich. What it does is protect everything else. Without an emergency fund, any unexpected cost forces you to either take on debt or sell investments at the wrong time. Getting this pot built first gives the rest of your financial plan a solid foundation to stand on.
Pension Contributions: Do Not Forget These Count
A mistake a lot of people make when thinking about how much they save each month is forgetting to count their pension contributions. If your employer is contributing 5% and you are contributing 5%, that is 10% of your salary going towards your future every single month. That is real saving, even if it does not feel like it because you never see the money hit your current account.
As a rough guide, the total going into your pension each month should be at least 10% to 15% of your salary when you combine your contributions and your employer’s. If your workplace scheme is only doing the legal minimum of 8% combined, it is worth considering whether you can top it up with a SIPP on the side, especially if you are a higher rate taxpayer and can claim the additional tax relief.
Saving vs Investing: Understanding the Difference
Not all saving is equal. Money sitting in a cash savings account is safe but it is slowly losing value in real terms once inflation is factored in. Over a 10 or 20 year period, cash savings significantly underperform invested savings. A Stocks and Shares ISA holding a simple index fund will, over the long run, grow considerably faster than a cash ISA or a standard savings account.
The practical approach for most people is to hold three to six months of expenses in accessible cash, then put everything else to work in a Stocks and Shares ISA or pension where it can actually grow. The ISA allowance is £20,000 per tax year, which gives you plenty of room to invest tax free before you need to think about anything more complicated.
What If You Cannot Afford to Save Much Right Now?
This is the question most articles skip over, so let us address it properly. If money is tight and saving 20% of your income feels completely out of reach, the answer is not to give up. It is to start small and automate it.
Set up a standing order for the day after payday for whatever you can genuinely afford, even if that is £50 or £100 a month. Automating it removes the decision entirely. You never see the money in your current account, so you do not miss it. Over time, as your income grows or your outgoings reduce, you increase the standing order. Small consistent amounts over long periods of time do serious work thanks to compound growth.
Fifty pounds a month invested from age 25 could grow to well over £70,000 by retirement age assuming modest average market returns. That is the power of starting early even when the amount feels insignificant.
A Simple Monthly Savings Target by Income
To give you a concrete number rather than just percentages, here is a rough guide based on common UK take home pay levels.
If you take home £1,800 a month, aim to save at least £180 to £360. If you take home £2,500, target £250 to £500. On £3,500 a month, £350 to £700 is the range to work towards. On £5,000 or more, you should realistically be saving £750 or more every single month and investing the majority of it rather than leaving it in cash.
These are starting points, not ceilings. The more you can save and invest consistently, the faster your financial position improves.
There is no single magic number that works for everyone, but the 20% of take home pay guideline is a strong target to work towards. If you are not there yet, 10% is a meaningful starting point. If even that feels like a stretch, automate whatever you can and build the habit first. The amount matters less than the consistency, especially in the early years.
Know your emergency fund target, count your pension contributions, and make sure the money you are setting aside is actually working for you rather than just sitting in a low interest account going nowhere. Get those three things right and you are already ahead of the majority of people in the UK.
Content on IceburgWealth.com is for informational purposes only and not intended as investment advice. While we strive to provide accurate and up-to-date information, Iceburg Wealth is not responsible for any errors or omissions, or for outcomes resulting from the use of this information. Readers should seek professional advice before making any financial decisions.