Saving rates = wealth metric
Savings rate as a wealth metric
Why percentage matters more than amount
Most people track their savings in dollars. A more useful number is the percentage of your income you're saving — and it tells a very different story.
What savings rate is
Your savings rate is the percentage of your after-tax income that you save or invest rather than spend.
If you earn $80,000 after tax and save $12,000 in a year, your savings rate is 15%.
Why percentage beats dollars
A dollar amount tells you how much you saved. A percentage tells you how efficiently you're converting income into wealth — and it scales with your life.
Someone earning $60,000 and saving 25% is building wealth faster than someone earning $120,000 and saving 8%, even though the dollar amounts are similar. The higher earner has more income but proportionally more lifestyle cost eating into it.
Savings rate is also the primary driver of how long it takes to reach financial independence. The maths is stark: a savings rate of 10% means you need roughly 40 years of working to fund 30 years of retirement.
A savings rate of 30% cuts that to around 25 years. At 50%, it's closer to 17 years. Those numbers assume your investments grow at a reasonable rate and your spending in retirement matches your working life — but the core relationship holds.
What's a good savings rate?
There's no universal target, but some reference points:
- 10–15% — the baseline most financial planners recommend for a comfortable retirement at a conventional age
- 20–25% — building wealth meaningfully and with some flexibility on when you stop working
- 30%+ — on track for early financial independence, or building towards a significant goal like property
If you're below 10% and not carrying significant debt to justify it, it's worth understanding why.
Lifestyle creep is the enemy
The most common reason savings rates stagnate despite rising income is lifestyle creep — spending rises in step with earnings, so the gap between income and outgoings never widens.
This is where tracking matters. If your income has grown 20% in three years and your savings rate hasn't moved, the extra income went somewhere. SortMe can show you where.
How to use it with SortMe
Use your Total Income and the sum of your saving & investment allocations within a budget cycle. You can find this data in your Budget & Goal features.
To calculate your savings rate. Add up all your saving and investment allocations. Now divide by your income. That percentage is your current savings rate.
Track it monthly or quarterly. Small improvements compound over time.
When to get advice
If your savings rate is lower than you'd like and you can't identify why, or you're trying to optimise across KiwiSaver, debt repayment, and other savings goals simultaneously, Naked Finance can help you build a plan that balances all of it.
These articles are financial education, not personalised financial advice. For advice specific to your situation, talk to a licensed financial adviser.