What is the recommended percentage of income to allocate towards savings?

Allocating 20% of gross income towards savings is widely recommended by financial experts as it strikes a balance between saving for future needs and allowing for current living expenses. This percentage is often aligned with the idea of the "50/30/20" budgeting rule, which designates 50% of income for needs, 30% for wants, and 20% for savings or debt repayment.

By setting aside 20% of gross income for savings, individuals can work towards building an emergency fund, contributing to retirement accounts, and preparing for major future expenses, all of which are crucial for financial stability and growth. This approach promotes a proactive strategy for financial health, enabling individuals to avoid reliance on debt during unforeseen circumstances and to accumulate wealth over time.

Other options present higher or lower savings rates that may not be feasible or necessary for everyone’s financial situation. For example, saving 10% might not be sufficient for long-term goals, while allocating 30% or even 50% could be unrealistic for many individuals, especially those who may have significant living expenses or debts to manage.