The 10% Saving Rule – Is it enough?

For sometime now, I’ve been visiting other personal finance websites to read about other people’s savings habits. Most personal finance books advocate the 10% savings rule. The rule states that if you set aside 10% of your monthly income, then you will have enough for retirement. So I ask myself – is this rule applicable for everyone? From my point of thinking, 10% may not be enough depending on how you intend to spend retirement. If your retirement plans are anything like mine, or you still intend to be actively involved in other pursuits, you may need to set aside more than 10% annually.


As we progress on our career path, our annual income changes depending on our individual performances on the job. So, assuming you started off the career ladder with N750,000 annually and currently earn N2mn – N3mn now, saving 10% which boils down to N200,000 annually seems like shortchanging ourselves because it’s all about the power of compound interest. Assuming retirement has been pegged at 65years, an individual aged 28 years, has 37years till retirement to kick start a consistent savings and investment plan.


If you start off with N200,000 annually for long term investment plans, assuming the rate of return is 13% annually and you’re consistent with this figure till retirement. At the end of your career life span, you’ve saved a total of N7.4mn. assuming the initial amount and subsequent amount saved posts a return of 13% annually; you’d end up with a total sum of N226mn.  This plan will happen if you do not find yourself out of a job for a few years or your spouse loses his/her job; children’s school fees; annual vacations or other emergencies come up to disrupt your savings plan. For me, saving more than 10% annually will take care of any financial emergencies that may occur in the future.

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