Answer extracted from the Money Guy Show podcast — listen to the full episode below.
What's the minimum monthly savings rate you should aim for?
The baseline recommendation is a 10% savings rate, calculated by taking your monthly income and multiplying it by 0.1. However, financial advisors acknowledge this figure is considered a little low, especially for people in their 20s and 30s—but starting with 10% is still better than saving nothing at all.
This simple rule of thumb comes from a broader set of financial multipliers designed to simplify wealth-building decisions. The logic is straightforward: if you earn $4,000 per month, you should aim to save at least $400 monthly. As Brian Preston explains on the Money Guy Show, while the math is easy, the real challenge is understanding whether this baseline truly fits your personal situation.
The issue with relying solely on a percentage-based savings rate is that it doesn't account for your actual cost of living or income stability. Someone earning $150,000 annually and spending $6,000 per month might comfortably save 20% or more, while someone earning $30,000 and spending $2,500 per month might struggle to hit 10%. Context matters more than the formula itself.
Why 10% is a starting point, not a finish line
The real insight from financial advisors is that 10% should be viewed as a minimum threshold for people who are just starting out—particularly those in their 20s who haven't yet built the habit of consistent investing. If you're already in your 30s or beyond, the conversation shifts significantly, as compound growth over decades becomes harder to achieve without more aggressive savings rates.
The wealth-building power of starting early cannot be overstated. A dollar invested at age 20 has the potential to grow 88 times by retirement—meaning the percentage rate you choose now directly shapes your future. Even modest increases above 10% compound into meaningful differences over 30 or 40 years of investing.
For those earning hourly wages or working with tight budgets, the percentage approach can feel impossible. This is where understanding your actual monthly expenses becomes critical—rather than working backward from income, many advisors recommend calculating what you genuinely need to live on first, then dedicating everything remaining to savings and investments.
Beyond the 10% rule: A deeper framework
Financial advisors often pair the 10% savings recommendation with other multiplier-based rules to build a complete picture. For example, you should also aim to save four times your monthly income for emergencies, and work toward having 200 times your monthly income invested to achieve financial independence. These interconnected guidelines form a more robust financial strategy than any single percentage in isolation.
The practical path forward is this: start with 10% if that's all you can manage, celebrate that commitment, and then work steadily to increase it. Even reaching 15% or 20% as your circumstances improve creates exponentially better long-term outcomes. The real risk isn't hitting exactly 10%—it's doing nothing and hoping income alone will build wealth.
See also
What is the appropriate target for total invested assets based on monthly income according to common financial rules of thumb?
A common rule suggests taking your monthly income and multiplying it by 200 to determine a target for how much you should have invested if you want your investments to eventually replace your income.
What is Abound Wealth Management and how does it relate to The Money Guy Show?
Abound Wealth Management is the financial advisory firm run by Brian and Bo, the hosts of The Money Guy Show. They describe themselves as fee-only advisors providing comprehensive financial planning.
What is the Financial Order of Operations and how does it guide wealth building when behind on retirement?
The Financial Order of Operations is a nine-step process created by The Money Guy Show to guide financial prioritization, helping you make decisions about debt, retirement accounts, and investments in the optimal sequence.
Key takeaways
- The 10% monthly savings rate is the baseline recommendation, calculated as 0.1 times your monthly income.
- This minimum is considered too low for people in their 20s and 30s who have decades of compound growth ahead.
- Starting with any consistent savings habit beats waiting for the perfect percentage; increasing from 10% to 15% or 20% over time produces far better outcomes.
- Pairing the savings percentage with other financial multipliers—like a 4× emergency fund and a 200× investment target—creates a more complete wealth-building framework than relying on percentage alone.