How Much of My Income Should I be Saving? Save 60 Per Cent of Your Income and Retire in 10 Years!

Staring at your bank account, wondering where all the money went? The average Australian saved just 6.4% of their income in the September 2025 quarter – a far cry from the 20% most financial experts recommend.

If you’ve been asking yourself, “how much of my income should I save?“, here’s the reality: there’s no magic number that works for everyone. But the difference between saving 10% and 20% of your income could mean retiring five years earlier or scrambling to catch up in your 50s. 

This guide breaks down exactly how much of your income you should save, why your savings rate matters more than you think, and how to build a strategy that actually works for your life.

Key Insights

• Most financial experts recommend saving 20% of your income, but the Australian household savings ratio currently sits at just 6.4%
• The 50/30/20 rule suggests allocating 20% to savings, but alternative strategies like 70/20/10 or 60/30/10+15 may suit different situations
• FIRE (Financial Independence Retire Early) followers save 50-75% of their income to retire decades earlier
• Your ideal savings rate depends on your life stage, income level, and financial goals – first home buyers might prioritise different targets than pre-retirees
• Start with 10% if 20% feels impossible, then gradually increase as your income grows

How Much of My Income Should I Save in Australia?

Here’s what the data tells us. According to a 2025 survey by Money.com.au, the average Australian has $42,246 in savings – down from $46,825 the previous year. Baby Boomers lead with $56,300 in savings, while Gen Z averages just $24,620.

But these numbers don’t tell you what percentage of income people are actually saving. The Australian Bureau of Statistics reports that households saved 6.4% of their disposable income in the September 2025 quarter. That’s up from a concerning low of 1.8% in June 2023, but still well below the 20% benchmark most financial advisors recommend.

The real question isn’t just how much you should save – it’s how much you can realistically save while still living your life.

What Percentage of Your Income Should You Save?

Most financial experts land on a range between 10-20% of your gross income, with 20% being the gold standard for long-term financial independence. But here’s why that percentage matters more than the dollar amount.

Your savings rate directly determines your timeline to financial freedom. Someone earning $80,000 who saves 10% ($8,000 annually) will take significantly longer to build wealth than someone earning $60,000 who saves 20% ($12,000 annually). The percentage, not the absolute amount, drives your financial trajectory.

Consider this: at a 10% savings rate, you’d need to work roughly 50 years before you have enough saved to retire. At 20%, that drops to approximately 37 years. At 30%, you’re looking at around 28 years. The math is exponential because you’re not just saving more – you’re also learning to live on less, which reduces the total amount you need to retire.

For Australians specifically, your savings should account for superannuation. With the current compulsory super contribution at 12% of your salary (scheduled to remain at 12%), this is already being set aside for your retirement. Your personal savings rate should be on top of this super contribution.

The 50/30/20 Rule – Does It Still Work?

The 50/30/20 budgeting rule has been around for years, popularised by US Senator Elizabeth Warren. Here’s how it breaks down:

• 50% of your after-tax income goes to essential needs (rent/mortgage, groceries, utilities, transport)
• 30% goes to wants (dining out, entertainment, gym memberships, holidays)
• 20% goes to savings and debt repayment beyond minimums

For someone earning $75,000 after tax (roughly $5,770 per fortnight), that means $2,885 to needs, $1,731 to wants, and $1,154 to savings each fortnight.

The appeal of the 50/30/20 rule is its simplicity. You don’t need a complicated budget spreadsheet or detailed expense tracking. But does it actually work for most Australians in 2026?

With the median Sydney rent at $650 per week ($1,300 per fortnight), keeping “needs” to 50% is increasingly difficult for average earners. If you’re spending $1,300 on rent alone, you’d need an after-tax income of at least $2,600 per fortnight just to keep rent at 50% – before accounting for groceries, utilities, transport, or insurance.

That said, the 50/30/20 framework is a good starting point. If your needs are creeping above 60%, that’s a signal to either increase your income or reduce fixed costs. If you can keep needs below 50%, redirect that difference to savings.

Alternative Budgeting Strategies

The 50/30/20 rule isn’t the only framework. Here are alternatives that might suit your situation better:

The 70/20/10 Method

• 70% for all spending (needs and wants combined)
• 20% for savings and investments
• 10% for debt repayment or giving

This works well if you’re managing debt while still prioritising savings. By combining needs and wants into a single 70% bucket, you gain more flexibility in how you allocate spending.

The 80/20 Method

• 80% for all spending
• 20% straight to savings

The simplest approach. Pay yourself first by automatically transferring 20% to savings, then live on the remaining 80%. This forces you to adapt your lifestyle to your savings goal rather than the other way around.

The 60/30/10+15 Method (Fidelity’s approach)

• 60% or less for essential expenses
• 30% for discretionary spending
• 10% for near-term goals and emergency savings
• 15% of pre-tax income for retirement (including super)

For Australians, the 15% retirement piece is largely covered by the 12% compulsory super contribution, so this method aligns well with our system.

The key is choosing a framework that matches your income, fixed costs, and goals. A first home buyer saving for a deposit will prioritise differently from someone focused on early retirement.

Understanding the FIRE Movement

FIRE stands for Financial Independence Retire Early. The movement has gained serious traction in Australia over the past decade, particularly among millennials who watched their parents work until 65 and wondered if there was another way.

Here’s how FIRE works: instead of saving 10-20% of your income like traditional advice suggests, FIRE followers aim for 50-75% savings rates. Yes, you read that right – saving more than half of what you earn.

The math behind FIRE is based on the 4% rule. This suggests that if you have 25 times your annual expenses saved and invested, you can withdraw 4% per year indefinitely without running out of money. So if you need $40,000 annually to live, you’d need $1 million saved ($40,000 x 25).

How much of your salary should you save to achieve this? At a 60% savings rate, you could potentially retire in roughly 12 years. At 75%, that drops to under 10 years. The trade-off is living an extremely frugal lifestyle during your accumulation years.

Some FIRE variations include:

• LeanFIRE: Living on less than $40,000 annually in retirement through minimalist lifestyle choices. Requires a smaller nest egg but demands ongoing frugality.
• FatFIRE: Maintaining a middle-class or higher standard of living in retirement, typically needing $80,000+ annually. Requires a much larger portfolio (often $2 million+).
• CoastFIRE: Saving aggressively early in your career, then “coasting” without adding more to savings. Your investments grow naturally until traditional retirement age while you work just enough to cover current expenses.
• BaristaFIRE: Achieving enough financial independence to quit demanding full-time work and transition to lower-stress, often part-time work that you genuinely enjoy.

For most Australians, the full FIRE path isn’t realistic or even desirable. But the principles – tracking every dollar, questioning unnecessary expenses, prioritising long-term freedom over short-term consumption – apply even if you’re aiming for a more traditional retirement timeline.

Weekly Savings: What Does 20% Really Look Like?

Percentages are abstract. Let’s translate them into actual weekly and fortnightly figures based on median Australian incomes.

Annual Earnings	$60k (approx. $50k after tax)	$75k (approx. $60k after tax)	$100k (approx. $76k after tax)
10% Savings Rate	$96/week	$115/week	$146/week
15% Savings Rate	$144/week	$173/week	$219/week
20% Savings Rate	$192/week	$231/week	$292/week

 

Even saving $50 per week adds up to $2,600 annually. That’s a solid emergency fund starter or a decent contribution toward a home deposit over several years.

The trick is making savings automatic. Set up a direct transfer from your transaction account to a high-interest savings account on the day you get paid. That way, the money disappears before you can spend it.

Is Saving 20% Enough?

For many Australians, 20% is exactly right. For others, it’s either too aggressive or not nearly enough.

When 20% is perfect:

• You’re in your 30s or 40s with steady income
• You’re targeting retirement around age 60-65
• You already have an emergency fund established
• You don’t have high-interest debt dragging you down

When you might save less than 20%:

• You’re paying off high-interest credit card debt (focus on debt elimination first)
• You’re a single parent with limited income flexibility
• You’re studying or early in your career with entry-level income
• You’re recovering from a financial setback (job loss, medical expenses)

When you should save more than 20%:

• You started saving late (in your 40s or 50s) and need to catch up
• You’re aiming for early retirement or financial independence
• You’re a high-income earner with significant disposable income
• You have specific large goals (buying investment property, funding children’s education)

The 20% guideline assumes you’re also contributing to super. If you’re self-employed and making your own super contributions, you might target 15% to savings plus 12% to super, bringing your total to 27% of gross income.

 

How to Work Out Your Right Savings Rate

Your ideal savings rate isn’t pulled from a formula – it’s reverse-engineered from your actual goals. Here’s how to figure it out:

1. Define your goal: Be specific. “Save more money” is too vague. “Save $100,000 for a home deposit by December 2028” is actionable.
2. Calculate what you need: If you need $100,000 in 3 years, that’s $33,333 per year or $641 per week. Can you realistically save that much?
3. Work backwards to your percentage: If you earn $75,000 after tax and need to save $33,333 annually, that’s a 44% savings rate. If that’s impossible, either extend your timeline or reduce your target.
4. Factor in investment growth: Money saved doesn’t just sit there – it grows. At a conservative 5% annual return, saving $600 weekly for 3 years gives you closer to $100,000 thanks to compound interest.
5. Adjust for life stage: A mortgage broker can help you understand how home loan commitments will affect your savings capacity. A 25-year-old renting with housemates can save 30% far more easily than a 35-year-old with a mortgage and two kids.

Talk to an Inovayt financial planner to model different scenarios. They’ll show you exactly what savings rate you need to hit your specific goals based on your current situation and timeline.

Setting Up an Emergency Fund First

Before you obsess over retirement savings or investment property deposits, build a safety net. Your emergency fund is the foundation of financial security.

Financial experts recommend 3-6 months of essential expenses. Not 3-6 months of income – just the essentials you couldn’t cut in an emergency (rent, food, utilities, minimum debt payments, insurance).

If your essential monthly expenses are $3,000, aim for $9,000 to $18,000 in an accessible, high-interest savings account. That’s separate from your super, your investment accounts, and your long-term savings goals.

Why 3-6 months?

• 3 months covers most short-term setbacks: unexpected car repairs, emergency dental work, replacing a broken appliance
• 6 months provides security during major life disruptions: job loss, extended illness, family emergencies

Building your emergency fund:

1. Start with $1,000 as a minimum buffer
2. Gradually build to one month’s essential expenses
3. Keep going until you hit 3 months
4. Continue for 6 months if you have a variable income or dependents

Keep your emergency fund in a separate high-interest savings account with no debit card attached. You want it accessible but not too easy to dip into for non-emergencies.

Building a Savings Habit That Sticks

Knowing how much to save is one thing. Actually doing it consistently is another. Here’s how to build a savings habit that doesn’t rely on willpower alone.

• Pay yourself first: Set up an automatic transfer to your savings account on the day you get paid. Treat savings like a non-negotiable bill, not something you do with “leftover” money.
• Use separate accounts: Don’t mix savings with spending money. Open a dedicated high-interest savings account and never give yourself a debit card for it. 
• Gamify your progress: Track your savings growth visually. Whether it’s a spreadsheet, an app, or even a handwritten chart, watching the number climb creates motivation.
• Automate everything possible: Direct debits, automatic transfers, automatic super contributions – the less you have to manually remember, the more likely you’ll stay on track. 
• Increase savings with pay rises: When you get a salary increase or bonus, immediately redirect at least half of it to savings before you adjust your lifestyle upward. 
• Round up your savings: Use apps that round up purchases to the nearest dollar and deposit the difference into savings.

When to Get Professional Support

You can definitely figure out your savings strategy on your own. But there are situations where paying for professional advice will save you far more than it costs:

Work with a financial advisor when:

• You need to balance competing goals (house deposit vs super vs debt repayment vs investment property)
• You’re self-employed and managing both personal finances and business cash flow
• You’ve received a windfall (inheritance, redundancy payout, sale of property) and need to deploy it strategically
• You’re approaching retirement and need to structure your assets tax-effectively
• Your financial situation is complex (multiple income streams, trusts, investment properties)

An Inovayt financial advisor can build a personalised plan that accounts for your specific goals, risk tolerance, tax situation, and timeline. They’ll show you exactly how much you need to save to achieve financial independence on your terms, and help you stay on track with regular reviews.

Start Where You Are and Go From There

The question “how much of my income should I save?” doesn’t have a single answer. The average Australian saves just 6.4% of their income, while financial experts recommend 20%, and FIRE enthusiasts target 50-75%. Your right number sits somewhere in that range based on your income, expenses, goals, and life stage.

If you’re currently saving nothing, start with 5%. Once that feels comfortable, push to 10%. Then 15%. Then 20%. The goal isn’t perfection from day one – it’s building a sustainable habit that compounds over time.

Ready to build a savings strategy that actually works for your life? Our financial advisors specialise in helping Australians create personalised plans that balance today’s lifestyle with tomorrow’s freedom. We’ll show you exactly how much you need to save to hit your specific goals – if that’s buying your first home, retiring early, or simply achieving financial independence.

FAQs

What is the 50/30/20 rule?

The 50/30/20 rule is a budgeting guideline where 50% of after-tax income covers needs (rent, groceries, utilities), 30% funds wants (entertainment, dining out), and 20% goes toward savings and debt repayment. It provides a simple framework for balanced financial management.

Is saving 20% of my income enough for retirement?

Saving 20% of your income, including superannuation, is generally considered strong progress toward retirement. However, individual needs vary based on lifestyle expectations, age when you start saving, property ownership, and desired retirement age. Consider consulting a financial adviser for personalised guidance.

What is the 70/20/10 rule?

The 70/20/10 rule suggests allocating 70% of income to living expenses, 20% to savings and debt repayment, and 10% to donations or personal spending. It’s an alternative budgeting framework that prioritises savings while maintaining financial flexibility for charitable giving.

How much does the average Australian save per month?

The average Australian household saves approximately $1,500–$2,000 per month, though this varies significantly by income level, location, and life stage. Many Australians struggle to save consistently due to high living costs, particularly housing expenses in major cities.

At what age should I have $100,000 saved?

There’s no universal age, but many financial experts suggest aiming for $100,000 in savings (excluding super) by your mid-to-late 30s. This depends heavily on individual circumstances, including income, expenses, property ownership, and when you started saving seriously.

How much of my salary should go to rent in Australia?

Financial experts recommend spending no more than 30% of gross income on rent. However, in expensive cities like Sydney and Melbourne, many renters spend 35–40% or more. Lower housing costs allow greater flexibility for savings and other financial goals.