Glossary term
Savings Rate
Your savings rate is the percentage of your income that you save rather than spend. It is usually calculated as money saved divided by take-home pay, though some people use gross income. A higher savings rate builds emergency funds faster and shortens the time to reach long-term goals, often more than chasing a higher return.
Updated October 17, 2026 · Editorial Team
How Savings Rate works in practice
Add up everything you put toward savings in a month or year, such as transfers to savings, extra retirement contributions and money set aside for future goals. Divide by your income for the same period. Be consistent about whether you count employer retirement contributions and which income figure you use.
If you take home $6,000 a month and save $900, your savings rate is $900 ÷ $6,000 = 15%. That is $10,800 a year. Raising it to 20% means saving $1,200 a month, or $14,400 a year.
Your savings rate is one of the few levers fully in your control. Small increases, such as saving half of each raise, compound over time. Tracking it alongside your spending makes it easier to see where an extra percentage point could come from.
Savings Rate: quick questions
Should I use gross or net income for savings rate?
Either works if you are consistent. Take-home pay gives a clearer picture of your day-to-day budget.
Do retirement contributions count as savings?
Yes. Many people include both their own and any employer contributions, but note which you are counting.
Is paying down debt part of my savings rate?
Extra principal payments raise net worth like saving does. Some people include them; just be consistent.
Sources
- Survey of Household Economics and Decisionmaking (SHED) — Federal Reserve Board. Accessed October 17, 2026.
- Compound Interest Calculator — U.S. Securities and Exchange Commission (Investor.gov). Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations. See our methodology.
Put the definition to work.
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