Everyone needs some savings, but how much is enough? The right amount depends on your needs, goals, and when you’ll need the money.

Savings accounts offer security and easy access to cash. But keeping too much in savings could mean missing better opportunities. The key is balance. To have enough to cover unexpected costs and planned expenses without holding back long-term growth.

This article covers how to decide what to keep in savings, what to budget for, and whether a savings account is the best option.

Top savings priority – your emergency fund

An emergency fund is one of the most important reasons to keep money in a savings account. It acts as a financial buffer when unexpected costs arise. Many people aim to save three to six months’ worth of essential expenses. This can help cover rent or mortgage payments, groceries, bills, and other necessities if income stops or a large expense pops up.

To estimate how much you might need, start by listing your essential monthly expenses, such as:

• Rent or mortgage repayments
• Utility bills (i.e. internet, gas, electricity)
• Groceries
• Insurance premiums (i.e. car, private health, home & contents)
• Transport costs
• Minimum debt repayments

Add up the total, then multiply it by the number of months you want to cover. For example, if your essential expenses total $3,000 per month, a three-month emergency fund would be $9,000, while six months would be $18,000.

Factors like job security, financial commitments, and personal comfort levels determine the right amount for you. Someone with a stable income and no dependants may choose a smaller buffer, while someone with variable income or a family to support might prefer a larger fund.

Some people keep only a small emergency fund to free up money for investing. Others prefer extra cash for security. There’s no universal rule – it comes down to what works for you.

For a deeper understanding, check out our detailed article on how much to save in your emergency fund .

Other reasons to keep money in savings

Beyond an emergency fund, you might use a savings account for planned expenses. Here are some common reasons people set money aside.

• Home deposit – If you’re saving for a property, a savings account can keep your deposit secure while you build it up.
• Holiday savings – Keeping travel funds separate can make it easier to stick to your budget and avoid dipping into other savings.
• Future car purchase – If you plan to buy a car outright, saving in cash could help you avoid taking on debt.
• Upcoming large expenses – Weddings, renovations, or education costs are often easier to manage when savings are set aside in advance.

Some expenses aren’t emergencies but still pop up unexpectedly. A separate savings account for things like urgent car repairs or medical bills can prevent you from dipping into your emergency fund.

A savings account can be a useful tool for short-term and medium-term goals. But it’s also worth considering whether keeping money in cash is the best option, especially for goals with a longer timeframe. The next section explores how different savings strategies can help you manage your money effectively.

Different ways to structure your savings

There’s no single way to manage savings . The right approach depends on how many goals you’re saving for and how you prefer to organise your money.

Some common strategies include:

• One account for everything – Keeping all savings in one place can be simple, but it may make it harder to track specific goals.
• Separate accounts for different goals – Setting up individual accounts for things like a home deposit, travel, or car purchases can make it easier to see progress.
• Offset accounts – If you have a mortgage, an offset account can reduce interest costs while keeping savings accessible. This can be useful for large balances.
• Bonus interest savings accounts – Some accounts offer higher interest if you meet conditions like regular deposits or avoiding withdrawals. These features can help grow your savings faster if they align with your needs.

Here’s a fictional example. Peyton wants to save for a home deposit, a holiday, and a future car purchase. She sets up three savings accounts – one for each goal – so she can track progress separately. She adds to the home deposit fund each payday, transfers a fixed amount to the holiday fund monthly, and contributes to the car fund when she has extra cash. This system helps Peyton stay organised and prioritise her savings without mixing funds.

Aside from future purchases, some expenses don’t happen monthly but still need planning. A sinking fund, whether in one account or multiple, can help cover annual costs like insurance, car registration, or Christmas gifts. Putting aside a small amount regularly can make these expenses easier to manage when they arise.

Another thing to consider is how inflation affects savings. While keeping money in cash can be safe and accessible, its value may decline over time as prices rise. If your savings goal is years away, it might be worth weighing up other options. Next, we look at whether a savings account is the best way to reach your financial goals.

Is a savings account the best option?

Though a savings account offers security and easy access, it may not always be the best place to keep your money. A savings account is just one tool in a financial strategy. And the right strategy depends on your timeline and goals.

Here are some questions you can answer to help you decide:

Do you need the money in the next year?

A savings account may be a practical choice since your funds will be relatively secure and easily accessible.

Is your goal three to five years away?

You might consider whether a mix of savings and investments could work for you. Some people keep part in cash and invest the rest.

Is your goal five or more years away?

As mentioned earlier, inflation can erode the value of cash. Investments, like exchange-traded funds (ETFs) , could help maintain purchasing power over time. But remember that all investments carry risks and returns aren’t guaranteed.

Are you saving for a first home?

If so, the First Home Super Saver (FHSS) Scheme could be worth exploring. It allows you to save through super and may offer tax advantages. However, there are conditions, so it’s important to check if it suits your needs.

Choosing where to keep your money requires balancing security, accessibility, and potential growth. The best approach depends on how soon you'll need the funds and how comfortable you are with risk. Think about your savings in the context of your full financial picture to help ensure your money is working towards your goals.

Review and adjust your savings strategy over time

Your savings needs won’t stay the same forever. Life changes – like a new job, starting a family, or buying a home – can affect how much cash you need on hand.

It can help to review your savings levels regularly. It’s wise to check in every six to twelve months to ensure your savings still match your goals and financial situation.

Ask yourself:

• Has my income changed? A higher salary might allow for faster savings, while a job loss could mean adjusting priorities.
• Have my expenses increased? Major life events, like having a child or moving house, can shift financial needs.
• Do I still need this much in cash? As mentioned earlier, too much in savings could mean missing out on better growth opportunities.
• Are my savings goals still relevant? Some goals change over time – funds set aside for one purpose might be better used elsewhere.

Making adjustments doesn’t mean starting over. It helps ensure your money is in the right place for your current and future needs.

What savings approach makes sense for you?

There’s no perfect savings amount, just what works for your needs.

A savings account can offer security for emergencies and short-term expenses. But as we’ve said, it may not always be the best option for long-term goals.

Regularly reviewing your savings strategy can help ensure your money is in the right place at the right time. Needs change and your financial plan can change with them.

The goal is to feel confident that your savings work for you, whether that means having extra cash on hand or putting some of it to work elsewhere. The key is to be intentional. Start reviewing your savings today – small adjustments now can make a big difference in the long run.