A Look At The 10% Savings Rule

If you are looking for a surefire way to ensure that a portion of your income gets invested rather than spent, there are a number of options you could consider taking. One popular way is by following the “10% savings rule” which is a very simple budgeting plan that states at minimum, 10% of your income must be invested.


Still, this is very vague. You may be asking yourself what you should invest this 10% in, or if it will be enough. Simply put, this savings rule is rather conservative in terms of how much money gets invested.


However, this is ideal for many younger or inexperienced investors, as it gets them used to having to set aside money for long-term goals without drastically changing their lifestyle. I would recommend the 10% rule to people who have a bit of overhead debt that they are paying off such as student loans, but still want to commit to some kind of investing.


Where you invest your income in the 10% savings rule is much more of a personal decision. Emergency savings funds, 401ks, index funds, dividend stocks are some safer options you can put the percentage of income towards.


If you want to invest in more high-risk assets, you can always throw this 10% into individual stocks or cryptocurrency. Once you feel comfortable setting aside this 10% a month in savings or investments, I recommend ramping up the percentage a bit (as long as your income allows it). This is where you would now transition your budgeting plan from simply the 10% rule to something more complex such as the 50/30/20 rule that ensures more of your money gets invested.