How to Calculate a Marginal Rate of Savings

Increasing the savings rate will increase the cash you hold.

The marginal savings rate (MSR) is a metric used to identify the amount of savings from income for a given period. This calculation can help you identify how much money you are able to save out of the money you earn. It is calculated by dividing the total change in savings for a given period by the total change in disposable income for that period. Disposable income is defined as income that is available for spending.

Things You'll Need

• Calculator

Instructions

1. Determine the change in savings for the period. For example, if at the beginning of the year you had $1,000 in savings and at the end of the year you had $3,000 in savings, your change in savings would be $2,000.

2. Determine the change in disposable income for the period. Like the example in Step 1, if you began the year with $5,000 in disposable income and ended the year with $1,000 in disposable income, the difference in disposable income would be $4,000.

3. Divide the change in savings by the change in disposable income. Using the previous examples, where the change in savings for the year was $2,000 and the change in disposable income for the year was $4,000, the calculation would be as follows:

   $2,000 / $4,000 = .50, or 50 percent

   In this example, your marginal rate of savings is 50 percent.

References

• World Bank: Marginal Savings Rate (MSR)
• WordNet: Disposable Income