Your Savings Rate: Why and How to Calculate

(Please note, this page may contain affiliate links and we may earn fees from qualifying purchases at no additional cost to you. These earnings help us offset the cost of running this site. Read our Disclosure and Disclaimer for further info.)

Calculating your personal savings rate is one of the best ways to see how well you’re doing financially and how quickly you can expect to reach financial independence. It’s also one quick and easy measure of how this year compares financially to prior years.

What is a Savings Rate?

Your savings rate is the amount of money you save from your total income instead of spending it. Savings can be in many forms.

You might stash some in an emergency fund, retirement plans such as a 401k or IRA, college savings account, or principal paydown on your house.

To calculate your savings rate, you simply divide the amount of money you save each year by your total income. You can calculate your savings rate based on your gross (pre-tax) or net (after-tax) income.

Why it Helps to Know Yours

Why is it important to know how much of your gross or after-tax income you’re saving?