How Much of Each Paycheck You Should Save or Invest

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As a country, the United States stinks at saving money.

However, we collectively got our act together not long after the onset of COVID-19. In April 2020, Americans saved 34 cents for every dollar we earned.

Lockdowns (government or self-imposed) and the lack of in-person entertainment contributed heavily. But it was an eye-opener for many people, money expert Clark Howard says.

“It was unbelievable. People’s spending dropped like a rock. And people paid down debt like crazy,” Clark says. “The banks were freaking out because people were paying off credit card balances who had never done that before.

“It was a huge inflection point in how people handle money. The amount of money people were borrowing was going down. The amount of money people were saving was going up like I hadn’t seen in my lifetime.”

According to Federal Reserve Economic Data (FRED), by July 2021, Americans were still saving more of each dollar than they had in a sustained way since the early 1980s. But in the next year, we went from putting away nearly 11 cents for each dollar we make to less than 4 cents.

The most recent number: 3.9% savings in August 2023. Prior to last spring, we haven’t seen savings rates below 4% since September 2008.

“[That’s] better than zero cents on the dollar. But it’s not enough to create security in your life,” Clark says. “It’s not enough to be able to deal with financial emergencies. Or to save for the future, like retirement — or paying for education for a kid or a down payment on a house.”

Worse, those credit card companies and banks are no longer worried. Household debt reached $16.9 trillion at the end of 2022, according to the Federal Reserve Bank of New York. That’s $2.75 trillion higher than it was three years earlier.

Credit card balances drove a large portion of the recent surge in debt, increasing by $61 billion in the last three months of 2022.

Americans are also using “Pay in 4” services, installment loans for simple items like gas and clothing, much more frequently.

Clark is worried about the financial stress that people are under, particularly with inflation at a generational high and temporary uncertainty in the markets. It’s a great time to reevaluate your approach to building an emergency fund and saving for retirement.


“You take out all the financial cushion in your life when you owe and owe and owe, and you’re not saving money,” Clark says. “As you take on more debt, you’ve got to spend more money on that debt.

“If I’m describing you, take a timeout. Try to get that spending and that borrowing and the saving all going in the right direction again. We showed two years ago we could certainly do it. And now it’s time for us to get back to that.”

Clark was saving 50% of his income early in his career, retiring in 1987 when he was just 31 years old. While this won’t be possible for everyone, every extra dollar you put away counts.

Daniel Sparks of the Motley Fool put together a chart based on numbers from If you bump your savings rate from 10 to 20%, you can likely retire 14 years earlier.

A lot of experts say you need to consistently save 20% of your take-home pay.

But there is not a one-size fits all solution. Exactly how much of your paycheck you should put toward savings depends on many factors, including your age, how much money you have in a savings account, any debts you owe (interest rates and amounts) and whether you’re on track for retirement.

Clark has a nice guide on the steps you should take in your financial life in order. But his biggest directive has always been simple: live on less money than you make.

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