The formula
How to calculate savings rate
Your savings rate is the share of what you earn that you do not spend. It is the single most predictive number in personal finance, because it sets both how fast the pot grows and how small the pot needs to be.
Use take-home pay rather than gross, and count every pound that stays yours — pension contributions, ISA deposits, and capital repayments on debt all qualify. What does not qualify is money moved between current accounts.
What to enter:
- Monthly take-home pay — after tax and pension deductions
- Amount saved each month — anything that leaves your spending accounts and stays yours: savings, investments, overpayments on the mortgage
Results appear immediately — there is nothing to submit. Changing a field rewrites the link, so you can share the exact scenario you are looking at.
Worked example
Here is the calculation with the starting values:
- Monthly take-home pay: 3,200
- Amount saved each month: 640
That gives:
- Savings rate: 20 %
- Saved per year: 7,680
- Monthly spending: 2,560
Reading the result
Rough bands: under 10% is fragile, 15–20% is a conventional retirement plan, and above 30% you are on an early-retirement track whether or not you call it that. The reason a high rate compounds twice is that saving half your income means living on half your income, which cuts the target as well as filling it faster.
Where this goes wrong. Averaging a good month is the usual mistake. Take a full year including the holiday, the car repair and Christmas, then divide by twelve — most people find the honest figure is several points below the one they quote.
They are real savings, so include them if you also add them to income; otherwise you are dividing a bigger numerator by an unchanged denominator and flattering the result. Many people track two figures: a personal rate on take-home pay, and a total rate including the employer match.
Roughly 40% of take-home pay, assuming a 5% real return and a 4% withdrawal rate. At 25% it is closer to 30 years, and at 10% you are looking at 45 or more — which is why the rate matters more than the return.
It returns savings rate. With 3,200 monthly take-home pay and 640 amount saved each month, that comes to 20 %. Change any field and the figure moves with it.