The information contained in this article not intended to be a substitute for legal or financial advice that can be provided by your own attorney, accountant, and/or financial advisor.
Saving is something we should all be trying to do although that is usually easier said than done. Being able to save a portion of your income can help you build a nice nest egg and prepare you for the unexpected. Whether you are investing these savings or putting them towards something bigger like a downpayment, saving your money is a great habit to get into. In this article, I’m going to tackle the question: is saving 2K a month good?
Savings of any type is great but if you can save $2,000 a month you are getting a great headstart in life. Being able to save 2K every month is a great feat no matter how much money you make. You will be surprised at how fast these savings will compound into a meaningful amount of cash!
There are certainly some things you will need to take into account here. How much do you earn annually? What are your fixed and variable costs each month? Are you compromising other areas of your life just to reach a savings amount of $2,000 every month? Let’s take a closer look at what saving 2K a month can do for you.
Is Saving 2K a Month Good?
Any time you can save a portion of your income each month or even each week, you are setting yourself up for financial stability. If you earn enough each month that you can put away some funds for a rainy day, then all the power to you. You can invest this money to compound your growth over time or keep it safe in a normal savings account. Either way, you are doing wonders for your future self, you just might not realize it yet!
Saving 2K a month is the equivalent of saving 24K every year. Within a couple of years, you’ll likely have enough for a downpayment on a property. After a decade, you’ll have a few hundred thousand dollars to play with. In thirty years, well, you might just be sitting on a million dollars! Of course, things can change over time but if you are able to keep it up, these are some of the lofty results you can expect!
Let’s be real for a second: not a lot of us are going to be able to put aside 2K a month on a regular basis. Large costs pop up unexpectedly throughout the year and then there are things like vacations. Unless you want to give up all of these things altogether, it is probably going to be difficult to consistently save 2K a month.
How Much Should You Save Per Month?
This all depends on your income and living costs. In a place with a low average income and low cost of living, saving 2K a month might not be necessary. But in an area with a higher average income, it might be a bit easier to put aside a large amount each month.
What are your costs? Do you pay rent or a mortgage? Take into account things like groceries, insurance, transportation costs, and recurring bills. It makes no sense to save 2K a month if you need that money to pay off your day-to-day costs. You’ll need to take care of these things before you even think about putting aside your money each month.
As a general rule, saving about 20% of your after-tax income each month is a good start. While 2K a month is a great milestone, you can start saving any amount you want to get the ball rolling. Some months it might only be $500 or even $300. That’s okay! The important thing to take away from this article is that saving any amount you can each month definitely pays dividends down the road.
Which Investment is Best for Savings?
Saving 2K a month is one thing but how can you help that money grow over time? Investing is the easiest way to see compounded returns on that monthly investment. The problem is that it isn’t always easy to figure out where to invest your money. Don’t worry, we’ve got some solutions that we think will help!
If you don’t want to worry about the performance of individual stocks then putting that savings into a low-cost index fund or ETF is probably the safest route. You can invest in entire indices, and sectors, or even hold a balanced portfolio of stocks and bonds. Not only will these ETFs provide capital growth, but they also pay out dividends on a quarterly or even monthly basis.
For those that have a higher risk tolerance, you can invest that money into alternative assets like real estate or cryptocurrencies. These assets can be volatile, especially cryptocurrencies, so do so at your own risk and after you have done your own research. For those that are risk-averse, you can always seek out a high-interest savings account that will pay you a flat percentage in interest every month.
The Bottom Line: Is Saving 2K a Month Good?
If you are able to save this much every month, I say go for it! There are a lot of people in this world that don’t even make 2K a month so if you are able to save or even invest that much, you are way ahead of the game! All you need is patience and you will see how quickly these savings can grow.
Remember to pay off all your bills and costs each month before putting aside that $2,000. Saving 2K a month will really set you up for success in the future no matter where you choose to invest it!