Savings rate: What it is and why it matters in personal finance.
Mário Pires | Schroders
In this position, Mário Pires is responsible for meeting the interests and needs of intermediary and institutional clients in Portugal, as well as growing the business in the region.
July 2026, by Mário Pires
The savings rate is one of the most important indicators in personal finance and the economy. In fact, several financial and economic organizations, such as the OECD, use this indicator to analyze the financial health of households and the economic stability of countries. It reflects the ability that individuals, families, or even a country have to set aside part of their income for future use. In other words, it shows what percentage of income is not allocated to immediate consumption.
From an economic point of view, savings represent the difference between income earned and expenses incurred. For example, when a person receives a salary and decides not to spend part of it, that money constitutes savings. The savings rate therefore allows us to measure, in percentage terms, how much money is saved in relation to total available income.
Its importance lies in the fact that it functions as an indicator of financial security. A healthy savings rate allows you to cope with unforeseen events, plan for future goals, and reduce dependence on debt. In addition, it makes it easier to create an emergency fund, buy a home, or prepare for retirement. Financial institutions and supervisory bodies consider the habit of saving to be one of the foundations of a balanced household economy.
Furthermore, at the macroeconomic level, when families save, they generate resources that can be channeled into productive investments through the financial system. In this way, savings contribute to a country's economic growth and financial stability.
However, an excessively low savings rate can lead to economic vulnerability. Households with limited ability to save often have a harder time coping with unexpected situations such as unemployment, high inflation, or interest rate hikes. Conversely, a rate that is too high can also have negative effects on the economy, since lower consumption reduces demand and can slow economic growth. Therefore, economists talk about the need to maintain a balance between saving and consumption.
Factors that influence the savings rate
The savings rate can be influenced by factors such as income level, inflation, interest rates, confidence in the economy and financial literacy.
For example, when incomes increase, the ability to save usually also increases. Similarly, high interest rates can encourage people to save more, especially when financial products offer higher returns.
Financial literacy also plays a crucial role, since, as the Bank of Spain and the National Securities Market Commission (CNMV) emphasize, it is important for citizens to understand basic financial concepts in order to make responsible decisions about spending, saving, and investing.
How much and how should you save?
In practice, experts often recommend setting periodic savings goals and automatically setting aside a portion of your income to avoid spending all your available money. Although there is no universal ideal savings rate, many financial advisors recommend saving between 10% and 20% of monthly income, always adjusting that percentage to each person’s financial situation.
In fact, the 50/30/20 rule is a financial planning method popularized by Elizabeth Warren that proposes allocating 20% of net monthly income to savings. This method structures the budget into three main blocks: 50% for basic needs, such as rent or mortgage payments, essential services, food or transportation; 30% for discretionary expenses or personal wants,including leisure, travel, clothing and hobbies; and the remaining 20% for savings, which covers the emergency fund, reform, or early repayment of debts.
In short, the savings rate is much more than a simple mathematical calculation. This is a key indicator for measuring the financial health of households and the economy as a whole. Maintaining an adequate savings rate allows you to face the future with greater stability, reduce economic risks, and improve your ability to achieve personal and family goals. Furthermore, it fosters responsible financial habits and contributes to sustainable economic development.l.