Logo

Savings Rate

January 29, 20234 min read

{noun} Personal savings divided by disposable personal income, expressed as a percentage.

What Is a Savings Rate?

A savings rate is the percentage of disposable personal income that is set aside, or saved, instead of spent on the consumption of goods and services. Your savings rate is the money you set aside for a given period divided by your personal income net of taxes for that same period, expressed as a percentage. Your personal savings rate shows how much you save relative to how much money you have available to spend. The aggregate of individuals' savings rates is known as the national savings rate.

How Is a Savings Rate Calculated?

To calculate an annual savings rate, take your annual income, and subtract your personal current taxes paid in that year to get your annual disposable income. Next, subtract your annual spending from your annual disposable income to get your annual personal savings. Then, divide your personal savings for the year by your disposable income for the same period. The result is your personal savings rate for that year.

Annual Income – Annual Taxes = Annual Disposable Income

Annual Disposable Income – Annual Spending = Annual Personal Savings

Annual Personal Savings / Annual Disposable Income = Annual Savings Rate

A savings rate can be calculated for any time period, such as a month or a year.

Why Are Savings Rates Important?

Your savings rate shows how much of your income from that period you’ve saved or put aside as a nest egg or for retirement. In addition to saving for your retirement, building adequate savings is important because it can help you:

Prepare for emergencies. If you have savings to cover unexpected bills, you're less likely to take on potentially unmanageable debt.

Be ready for large expenses. College tuition, a down payment on a house, or vacation costs are easier to manage if you’ve saved ahead of time.

Personal Savings Rate

Knowing your personal savings rate allows you to measure progress toward your savings goals, and possibly, to see how well you’re doing at delaying gratification now to save for things you’ll want or need in the future. Knowing (and maintaining) your personal savings rate is an important part of making a household budget and can help you meet your financial goals.

National Savings Rate

The aggregate of individuals' savings rates, or the national savings rate, is important because national savings rates can affect demand for products, funds available for investment, and rates of economic growth for the economy as a whole. A sufficiently high national savings rate can help protect the economy against serious recessions.

What Is an Example of a Savings Rate?

Let­’s say your gross income last year was $50,000, you paid $10,000 in personal taxes, and you spent $35,000 over the course of the year. In this scenario, your personal savings rate for the year was 12.5%.

Here’s how we got that. After taxes, you had $40,000 to spend. If you spent $35,000, the remaining $5,000 is considered savings. And $5,000 is 12.5% of $40,000.

$50,000 – $10,000 = $40,000

$40,000 – $35,000 = $5,000

5,000 / 40,000 = $12.5%

What Is a Good Personal Savings Rate?

One rule of thumb is to save 20% of your disposable income each month. This often repeated figure is aspirational because average personal savings rates have historically been much lower. Your ideal savings rate depends on your situation—you can benefit from saving even if it’s far less than 20%.

What Is a Negative Savings Rate?

A negative savings rate is when spending and expenses exceed disposable income for a specified period of time. A negative savings rate often results in needing to dip into savings or borrow money to get by.

For example, let’s say your annual gross income last year was $50,000, you paid $10,000 in taxes, and you spent $48,000 for the year. In this scenario, your personal savings rate for the year was negative: -20%.

Here’s how we got that. After taxes, you had $40,000 to spend. If you spent $48,000, that’s $8,000 more than your disposable income for the year. And -$8,000 is -20% of $40,000.

On an individual level, a negative savings rate can usually means you either have no savings and are taking on debt, or you’re drawing down savings to meet current consumption. Sometimes living paycheck to paycheck is all you can do. When your situation improves, consider making a habit out of putting something away for savings every week.

At a national level, a negative savings rate indicates a collective reduced ability to respond to economic shocks. In this case, if many people (or groups of people) abruptly change their spending and savings habits all at once (say, to start saving again), the result could be a drop in consumer demand that could negatively impact the economy.

What Counts as Personal Income?

When calculating a savings rate, personal income includes wages and self-employment income. It also includes dividends or interest and rent payments from tenants, as well as government benefits, like Social Security payments. Capital gains don't count as personal income for this calculation.­­

What Counts as Spending and Savings?

Spending is made up of all personal outlays other than taxes, including spending on goods and services, charitable donations, and interest payments.

Savings is the amount of money left over after spending. Savings also include investments.

How Have National Savings Rates Changed Over Time?

In the 1970s, the U.S. savings rate was around 10% to 13%. It gradually dropped to about 3% to 4% during the 2007-2008 global financial crisis. It rose to 7% by 2019, then shot up to 33.7% in 2020 after the Covid pandemic hit because stimulus checks boosted household income while lockdowns reduced opportunities to spend. By December 2022, the U.S. savings rate was back down to 3.4%.

How Can You Increase Your Savings Rate?

  • Start by creating a budget. See where you spend and where you could redirect dollars to savings.

  • Set up automatic transfers to a savings account. You could transfer money from a checking account on a regular schedule or have part of your paycheck deposited directly into savings.

  • Consider “round-up” programs. Programs that round up the dollar value of your purchases and save the change for you may help.

  • Save any unexpected income. Bonuses, raises or tax refunds can have a big impact on savings.

You May Also Like

Related Resource Center
Find a loan that not only meets your needs, but one you have a good chance of qualifying for.
Apr 17, 2024
6 min read
Personal Loan Eligibility Criteria You Need to Know Before You Apply
Often a measure of last resort, reasons for filing bankruptcy frequently involve overwhelming medical debt, financial strain due to a divorce, or an unaffordable mortgage.
Oct 17, 2023
6 min read
Exasperated looking young woman sitting at desk looking at laptop holding papers in one hand and her head in the other
Soft inquiries won’t impact your credit scores, and hard inquiries can hurt your scores slightly. Here's what you need to know.
Oct 9, 2023
6 min read
woman on mobile phone image
Identifying red flags and knowing how to correct inaccuracies in your credit report can help keep your credit score in good shape. Here's what you need to know.
Oct 2, 2023
9 min read
How to Read Your Credit Report: Red Flags and Errors You Should Dispute
Want to consolidate high-interest debt, renovate your home, or manage an unexpected expense? A personal loan could help.
Sep 25, 2023
7 min read
Top 4 Reasons to Get a Personal Loan
Related Impact
From groceries and diapers to Halloween costumes for pets, nearly 60% of American consumers prefer to shop online for everyday items that make life more convenient, comfortable, and enjoyable. And with rising prices showing no signs of stopping anytime soon, we’re pleased to introduce StackitTM from LendingClub Bank—a new browser extension that automatically finds and rewards eligible members with coupons and cash back for extra savings at more than 15,000 favorite online retailers.
Nov 13, 2022
2 min read
blog header stackit 765x430 v1-1
Even in today’s low-yield, high-inflation environment, it’s essential to keep a certain amount of money in an easy-to-access checking or savings account for things like daily household and emergency expenses, or to meet short-term financial goals.
Oct 2, 2022
5 min read
LendingClub Rewards Checking Nationally Certified as Trusted, Afforda
Since 2007, LendingClub has been on a mission to deliver a world-class experience to all our members. This month we took a moment to reflect on the more than four million members who have chosen LendingClub as their partner to help them reach their financial goals.
Apr 19, 2022
2 min read
Illustration of large number 4 and letter M made up of colorful, tiny illustrations of ethnically diverse people
In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. 
Mar 6, 2022
less than a minute read
Blog-post
LendingClub completed the acquisition of Radius Bank in February 2021. At that time, in addition to the direct-to-consumer deposit business, we inherited a fintech partner program, and several lending businesses. As we reach the one-year anniversary of the acquisition, and in conjunction with the conclusion of a strategic review of our business operations, we have made the decision to discontinue certain businesses that don’t fit our mission.  
Jan 2, 2022
2 min read
Man in blue button up shirt and glasses smiling
Related FAQ's
We offer several ways for you to make your monthly auto loan payment, so you can choose the method that works best for you. A statement will be mailed to you every month that shows the payment amount and due date.
Nov 29, 2023
less than a minute read
LendingClub provides a year-end statement that summarizes your account activity, including how much interest you’ve earned and information regarding Notes tied to loans that have been charged off.
Jun 7, 2023
less than a minute read
In some cases, we may need to confirm your employment before your application can be finalized. The fastest way to confirm your employment is to provide your work email address.
Jun 7, 2023
less than a minute read
To process your application, we may need to confirm your income matches what was on your application.
Jun 7, 2023
less than a minute read
The payment transaction type (signature-based or other) is ultimately decided by the merchant and is based on how the transaction is transmitted at the time of processing.
Jun 7, 2023
2 min read
Related Glossary
{noun} A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.
Sep 6, 2023
4 min read
{noun} The amount of unpaid interest that has accumulated as of a specific date, either on a loan or an interest-bearing account or investment. 
Mar 21, 2023
4 min read
{noun} The total annual cost to borrow money, including fees, expressed as a percentage.
Mar 21, 2023
3 min read
A debt that is written off as a loss because the financial institution or creditor believes it is no longer collectible due to a substantial period of nonpayment.
Feb 7, 2023
3 min read
{noun} An interest rate that remains the same for a set time, usually for the life of the loan.
Feb 4, 2023
3 min read

Any reviews presented are individual experiences and results may vary. Reviews collected and authenticated by Bazaarvoice. All reviews can be accessed at https://www.lendingclub.com/company/reviews

Unless otherwise specified, all credit and deposit products are provided by LendingClub Bank, N.A., Member FDIC, Equal Housing Lender (“LendingClub Bank”), a wholly-owned subsidiary of LendingClub Corporation, NMLS ID 167439. Credit products are subject to credit approval and may be subject to sufficient investor commitment. Credit union membership may be required. Deposit accounts are subject to approval. Deposit products are FDIC-insured up to $250,000 per depositor, per ownership category.

"LendingClub" and the "LC" symbol are trademarks of LendingClub Bank.

© 2024 LendingClub Bank. All rights reserved.