What's the Right Savings Target? Financial Expert Dave Ramsey Breaks Down Your Options

A survey of over 1,000 Americans conducted by GOBankingRates unveiled a striking reality about savings habits: while 73% maintain active savings accounts, roughly 36% are keeping $100 or less in them. This raises an important question—what amount should actually be sitting in your savings?

The One-Size-Fits-All Approach Doesn’t Work

Dave Ramsey, through his Ramsey Solutions platform, makes it clear there’s no universal dollar figure that works for everyone. Instead, your target depends entirely on what you’re saving for.

Your savings goals differ based on personal circumstances, lifestyle choices, and financial priorities. Someone saving for a home down payment has very different needs than someone building funds for a vehicle purchase. Ramsey emphasizes distinguishing between three distinct savings categories: goals-based savings, emergency funds, and sinking funds.

Breaking Down the Three Types of Savings

Sinking Funds: Short-Term Scheduled Expenses

Sinking funds cover predictable expenses coming within months. If a $900 mattress purchase is on your horizon three months away, you’d budget $300 monthly into this fund. This approach keeps unexpected expenses from derailing your budget.

Emergency Funds: Your Financial Safety Net

Emergency funds protect against genuine crises—job loss, major home repairs, urgent medical costs. Ramsey recommends starting with $1,000 as your initial emergency cushion. Those earning under $20,000 annually should target $500 instead.

After eliminating all non-mortgage debt, move to Baby Step 3: building three to six months’ worth of living expenses. Calculate this by totaling your monthly necessities—housing, food, utilities, transportation—then multiply by three or six. For someone spending $4,000 monthly, that means $12,000 to $24,000 in emergency reserves.

How Much to Have in Savings for Retirement

Retirement planning operates on percentages rather than fixed amounts. The recommendation is straightforward: invest 15% of household income toward retirement annually.

Consider a household earning $80,000 yearly. Following this guideline means directing $12,000 annually into retirement accounts. The beauty of retirement savings is there’s no upper limit—the more you contribute, the better. Ramsey suggests maximizing employer 401(k) matching programs first, then funneling additional funds into Roth IRAs for tax-advantaged growth.

The Bottom Line on How Much to Have in Savings

Your ideal savings amount depends on your specific situation and financial stage. Start with a starter emergency fund, eliminate consumer debt, then build toward your full emergency cushion while simultaneously funding retirement accounts. This structured approach, outlined in Ramsey’s Baby Steps framework, ensures you’re saving strategically rather than arbitrarily.