Saving is a vital component of financial planning. Many people save too little and do not have an accurate grasp of their spending habits. While there’s no magic formula to save money, and the amount of money one should save each month depends on how they want to live now and in the future, a handful of strategies can help people save more money each year.

• Follow the 50/30/20 rule. The popular 50/30/20 rule advocates allocating 50 percent of your budget to essentials like rent, food, and housing, 30 percent for discretionary spending, and 20 percent for savings. Many people cannot save 20 percent of their income. In such instances, people can make a concerted effort to save 10 percent of their take-home pay.

• Build an emergency fund. The credit reporting agency Experian recommends consumers keep between three and six months’ worth of expenses in an emergency fund. 

The fund should cover expenses on the absolute necessities paid each month, like utilities, rent/mortgage, and groceries.

• Set goals. Savings goals can help a person stay on track and provide motivation to put money away. Establish separate savings accounts for each goal to reduce the temptation to spend. For example, if the goal is to
save more for vacations, open an account where funds are used exclusively for vacations.

• Automate with your employers’ help. Certain employers allow workers to direct deposit a paycheque into more than one bank account. Request the payroll manager put 10 percent or 20 percent of a paycheque into a savings account while the remainder is deposited into a chequing account. Automated deposits can help individuals get accustomed to living on less.