Savings Rate — Definition and What It Means for Your Income
The percentage of income set aside for savings or investments rather than spent.
Savings rate is the percentage of after-tax income that is saved or invested rather than spent on consumption. It's a key metric for assessing long-term financial trajectory and retirement readiness.
Why it matters
Savings rate — not just income level — is often the strongest predictor of long-term wealth accumulation. Someone earning less but saving a higher percentage can outpace a higher earner with a low savings rate.
Example
Someone earning $60,000 take-home who saves $9,000/year has a 15% savings rate. Someone earning $120,000 take-home who saves $6,000/year has only a 5% savings rate — despite earning twice as much.
Related tools
Related terms
Savings Rate — FAQ
What is a good savings rate?
15-20% of gross income is a commonly cited target, though this varies significantly based on cost of living, debt obligations, and life stage.