Savings how much should you have

If you don't budget correctly, you may not have anything to keep in your bank account. Don't have a budget? Here are some thoughts on how to do it. Instead of trying to follow a complicated, crazy-number-of-lines budget, you can think of your money as sitting in three buckets.

It would be nice if you didn't have monthly bills, but the electricity bill cometh, just like the water, internet, car, and mortgage or rent bills. Assuming you've evaluated how these costs fit into your budget and decided they are musts, there's not much you can do other than pay them. This is the bucket where anything within reason goes. Interestingly, most planners include food in this bucket because there's so much choice in how you handle this expense: You could eat at a restaurant or eat at home, you could buy generic or name brand, or you could purchase a cheap can of soup or a bunch of organic ingredients and make your own.

This bucket also includes a movie, buying a new tablet, or contributing to charity. You decide. If you're not aggressively saving for the future—maybe funding an IRA, a plan if you have kids, and, of course, contributing to a k or another retirement plan, if possible—you're setting yourself up for hard times ahead.

This funding is essential for your future. Financial guru Dave Ramsey has a different take on how you should carve up your cash. Beyond your monthly living expenses and discretionary money, the major portion of the cash reserves in your bank account should consist of your emergency fund.

How much do you need? Everybody has a different opinion. Should that fund really be in the bank? Some of those same experts will advise you to keep your five-figure emergency fund in an investment account with relatively safe allocations to earn more than the paltry interest you will receive in a savings account.

On the other hand, the recent months may have reshaped your thoughts on what feels "safe. The main issue is that the money should be instantly accessible if you need it. And also remember that money in a bank account is FDIC insured. Aim for building the fund to three months of expenses, then splitting your savings between a savings account and investments until you have six to eight months' worth tucked away. After that, your savings should go into retirement and other goals—invested in something that earns more than a bank account.

How much money you should keep in a savings account depends on your budget. Savings accounts are designed to receive deposits, rather than frequent withdrawals. How much do you need to survive? Divide that number in half. Can you save this monthly? If so, you'll build a six-month emergency fund within the next year. Make a list of major expenses within the next decade, ranging from replacing your gutters to throwing your wedding.

If it's easier, list broad categories like "home repairs," "holidays" and "wedding. Write your ideal savings goal target and deadline. Divide by the number of months remaining to see how much you should save. When you run through this exercise, you'll probably discover that you can't save enough for every savings goal on your list. You now have four options:. Most people opt for a combination of those four choices. Did you want a simpler answer? No problem. More is fine; less may mean saving longer.

If your income isn't steady. If you're retired and most of your money is in more-volatile stock and bond investments. The important thing is that you've started saving something. This hypothetical illustration doesn't account for inflation. You know roughly how much you need to save for emergencies.

But where should you keep it? Find out where to put your emergency fund. Start your emergency fund We're here to help Talk with one of our investment professionals.

Call Monday through Friday 8 a. If you have kids, this is also the stage where you should be considering contributing to plans to pay for their college education, she adds. Lucienne Hinger Hubiak, a Certified Financial Planner at Mint, says a great rule of thumb is the spending guideline. By age 50, you should be well on your way. According to J. Others say: This is the point in your life when you should be saving most aggressively in order to maintain your current lifestyle in retirement.

I'm a wealth reporter at Forbes. Follow me on Twitter KristinStoller. Select Region. United States. United Kingdom. Kristin Stoller. Forbes Advisor Staff. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations.