With inflation still sticky, wages struggling to keep up and Social Security’s future uncertain, many millennials are wondering how much of each paycheck should really go toward savings in 2026.
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Robert R. Johnson, CFA, a professor of finance in the Heider College of Business at Creighton University, said the right answer depends on not just how much you save, but how you approach saving.
Follow This Rule, But With a Variation
Johnson is a fan of the 50/30/20 budgeting rule as “a good rule of thumb to guide millennials.” The rule states that you spend 50% on needs, 30% on wants and 20% on savings and debt.
However, he offered a modification “to have the entire 20% for savings and debt extinguishment should come from the other 80% — the needs and wants bucket.”
Higher earning millennials, he added, should save an even higher percentage of their income.
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Emergency Funds Are Non-Negotiable
Before worrying about investments or long-term goals, Johnson said, every millennial should establish an emergency fund. “It isn’t about the percentage of income going toward an emergency fund versus investing, it is about establishing an emergency fund,” he said.
Most financial advisors recommend six months of expenses, but Johnson said even three months is a good goal. “This fund is meant to cover life’s unexpected black swans — like losing one’s job or a significant health setback.”
He also pointed to the pandemic as a reminder to prepare for uncertainty. “The pandemic should serve as a lesson to get their financial house in order. There may be another catastrophic event in the future that would affect them.”
Be Intentional With Spending
Once the basics are covered, Johnson said spending intentionally is key. “The key with money resolutions is to budget and budget realistically. Specifically, one should not simply budget and track expenses, but one should budget for savings.”
The best way to make savings a priority is not putting away only what is “left over” after paying bills, he added, “It should be a line item on your budget. You don’t successfully build wealth by simply taking what you have left after all your expenses. We accomplish what we prioritize.”
Take the Labor Out of Saving
The simplest way to save consistently is to automate it, Johnson said. “Make it automatic. That is, have the money deducted from your paycheck before you receive it.”
“For instance, have an amount taken out of each paycheck and put directly into an investment fund — most appropriately a low-cost stock index fund. This strategy means you will be putting money into the market whether stocks are rising, falling or treading water. You will practice dollar-cost averaging and build significant wealth over the long run.”
He warned that people are easily tempted by short-term desires and will often spend money they know they should save. Automating decisions helps prevent that. “People should automate as many financial decisions as they can,” he said.
Consider Concurrent Savings Goals
Johnson also challenges the ideas spawned by finance gurus like Dave Ramsey that people should pay off all debt before saving. “[They] want to make financial decisions linear — like pay off all debt (except for mortgage debt) before saving,” he said. “Managing one’s finances is not done in a linear fashion. We have multiple goals we need to address concurrently.”
Think Beyond Saving
While saving money is essential, Johnson said true financial security comes from investing. “It is really very difficult, if not impossible, to effectively save for retirement. What people should be focused on instead is saving and investing for retirement.”
Savings alone, he said, are rarely enough to retire on. The growth potential of investing — and the compounding effect over time — are what make long-term wealth possible.
Invest a Raise
For millennials looking to increase wealth, Johnson recommended investing every pay raise. “If you simply invest that $5,000 annually into an investment account growing at a 10% annual rate, you will have accumulated over $822,000 in 30 years,” he explained. “You will have invested a total of $150,000 and have earned $672,000 from those investments.”
Even small raises, when invested early and consistently, can create powerful long-term results.
But Avoid This Savings-Draining Habit
Johnson cautioned millennials against lifestyle creep — spending more simply because they earn more. While modest lifestyle upgrades are fine, “making more money shouldn’t be incentive to reward themselves for receiving the raise by significantly scaling up on their spending,” he said.
“What happens is they are unable to improve their financial condition because they spend everything they make.” Instead, he suggested investing any money from a raise and acting as if you didn’t receive it.
Be Responsible for Your Own Retirement
Finally, Johnson said millennials need to recognize that their retirement outcomes are largely in their own hands, especially with the uncertain fate of Social Security. “It’s important to recognize in today’s defined contribution pension plan world that we are all responsible for our own retirement income.”
That doesn’t mean living without joy, however. “One needs to prioritize what expenditures are really important and not spend money on goods or services that aren’t as important… We should focus our expenditures on those activities that provide us the most happiness and limit our consumption of goods and services that provide us with less happiness.”
While the ideal percentage to save will vary by income and goals, Johnson’s advice makes one thing clear: For millennials in 2026, saving consistently, automating smart habits and investing early will matter far more than chasing perfection.
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This article originally appeared on GOBankingRates.com: How Much of Their Paychecks Should Millennials Save in 2026?
