Crunching Numbers: Mastering Your Savings Rate

In today's fast-paced world, having a basic understanding of savings and how to manage your finances successfully is critical. The savings rate is an important measure that can help you assess your financial health. We will go into the concept of the savings rate, and its significance, and provide step-by-step directions for calculating it in this detailed guide. Whether you're a newbie hoping to build solid financial habits or an experienced saver looking to improve your savings plan, this article has you covered.

What is a savings rate?

A savings rate is a percentage of money which is put aside or saved on a monthly basis from the total gross income.

Savings can be used for achieving your goals over time such as making big purchases, education, retirement, and anything you want.

Why should you know about your savings rate?

Knowing your own savings rate will simply help you to plan better. Not only will you be able to understand where you stand financially, but you’ll also be able to determine how much money you need to live comfortably after your retirement, for the maintenance of an emergency fund, or the amount needed to buy that house!

Having a solid savings rate offers numerous benefits:

a) Emergency Fund: A healthy savings rate allows individuals to establish an emergency fund to handle unexpected expenses, such as medical bills or car repairs, without relying on debt.

b) Financial Independence: A higher savings rate accelerates the accumulation of wealth, thereby paving the way for financial independence, retirement, or the pursuit of personal goals.

c) Flexibility and Security: A robust savings rate provides a safety net, offering financial security and the freedom to adapt to unforeseen circumstances or pursue new opportunities.

How to calculate your savings rate?

It’s simple maths. To get your monthly savings rate you need to divide the Total Monthly Savings by your Monthly income (post-tax income)

Once you multiply the decimal with 100 you will get your savings percentage.

This is how much percentage you save on a monthly basis.

Also, remember that a higher savings rate indicates an increase in savings.

Let’s suppose you earn a monthly income of INR 2,00,000 which amounts to INR 24,00,000 per annum. Now, if you save 35,000 per month for purchasing a home and 25,000 for your retirement/vacation etc. In total, you will be saving INR 60,000 monthly.

(60,000/2,00,000)*100 = 30% savings rate

OR if you calculate annually

(7,20,000/24,00,000)*100 = 30% savings rate

However, it is difficult to calculate or get an accurate approximation of your annual savings rate due to occurrences of miscellaneous expenditures or incomes over the year.

Is there an ideal savings rate?

While there is no such thing as an ‘ideal' savings rate for a household, experts suggest a 20% savings rate.

Keeping in mind inflation and economic changes, one must make provisions for an emergency fund, healthcare expenses, education, and financial security.

However, even the recommended rate varies according to you, your financial commitments, and your specific goals.

The number of years you need to save and the money you need for your financial goals and retirement help in determining your ideal savings rate.

It might be a complex process with several elements involved in it. To simplify everything, you can use Zactor Tech’s platform to plan, analyse and create a suitable financial trajectory to achieve your desired goals.

All you need to do is enter your basic details such as your income, expenses, specific savings, and financial goals, and the rest is taken care of by our very own Zactor Tech.

Is there a correlation between age and savings rate?

The closer you are towards your retirement the more you have to save!

In one’s early stages, there are more expenses such as education, loan payments etc. Which leaves little room for savings.

In the mid-career stage: Assuming that there is an increase in income, reduction of debt, and other necessities, there is a comparative up stick in savings.

As you get closer to retirement you increase your savings significantly due to the motivation to build a significant financial corpus and reduced financial commitments.

How do you increase your savings rate?

Increasing your savings rate is an important step towards achieving financial goals and securing your future. Here are some proven strategies to help you boost your savings rate:

Set Clear Savings Goals: Define specific and realistic savings goals. Whether it's creating an emergency fund, saving for a down payment on a house, or planning for retirement, having clear objectives will motivate you to save more.

Create a Budget: Develop a comprehensive budget that tracks your income and expenses. Categorize your expenses into fixed (rent/mortgage, utilities) and variable (groceries, entertainment). Identify areas where you can reduce spending and allocate more towards savings.

Track Your Expenses: Keep a record of all your expenses to gain a better understanding of where your money goes. This awareness can help you identify unnecessary or impulse spending habits that can be minimized.

Minimize Discretionary Spending: Evaluate your discretionary expenses, such as eating out, entertainment, or shopping, and find ways to reduce them. Consider alternatives that align with your budget, such as cooking at home, enjoying free activities, or exploring second-hand options.

Automate Investments: Set up a SIP (Systematic Investment Plan) from your salary/savings account. This ensures that a portion of your income is saved before you have a chance to spend it. Over time, this consistent habit can lead to significant savings growth.

Increase Your Income: Look for opportunities to boost your income. This could involve negotiating a raise at work, taking on a side gig, or pursuing freelance work. The additional income can be directly allocated towards your savings goals.

Review and Cut Expenses: Regularly review your recurring expenses, such as subscriptions or memberships, and consider canceling or downgrading those you no longer need or use. Negotiate better deals on services like insurance or utilities to save money.

Embrace Frugal Habits: Adopt frugal habits like meal planning, buying in bulk, using coupons, or shopping for deals. Small adjustments in your daily habits can lead to significant savings over time.

Pay Off High-Interest Debt: Prioritize paying off high-interest debts, such as credit cards or personal loans. By reducing your debt burden, you free up more funds that can be directed towards savings.

Stay Committed and Track Progress: Stay dedicated to your savings goals and regularly track your progress. Celebrate milestones along the way to stay motivated and adjust your strategy as needed.


Understanding the calculation of your current savings rate and the personalised ideal savings rate is critical for your financial freedom. Taking control of your financial future, achieving goals, and successfully managing unanticipated financial obstacles all rely on developing a strong savings pattern and utilising effective tactics. Recognise the importance of steadily increasing your savings rate while starting small and remaining dedicated to long-term financial well-being.

Don’t let your goals slip away

Start planning your roadmap today and take control of your finances.

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