In 1926, George S. Clason published The Richest Man in Babylon, one of the most enduring personal-finance books ever written. Its first law of gold is deceptively simple: "A part of all I earn is mine to keep." The recommended amount? At least one-tenth — 10%.
A century later, the advice still circulates in every budgeting thread and financial-literacy course. But does it actually hold up against 2026 costs of living, inflation, and the investment vehicles available today? Let us run the numbers.
The Core Rule: Pay Yourself First
The idea is straightforward. Before you pay rent, groceries, or subscriptions, you set aside a fixed percentage of your income for long-term savings and investment. You treat it as a non-negotiable expense — the first "bill" you pay each month.
Using a common net salary as our baseline:
10% Savings Rate
$300/month
from $3,000 net income
15% Savings Rate
$450/month
from $3,000 net income
The difference looks small — just $150/month. But compounded over decades, that gap becomes enormous. Let us see exactly how much.
Compound Growth Tables
Below we compare three common investment vehicles at both savings rates. Returns are annualised historical averages — actual results will vary, but these give a realistic ballpark.
10% of $3,000: $300/month
| Years | ETF (S&P 500) ~10% | High-Yield Savings ~3.5% | Pension Fund ~7% |
|---|---|---|---|
| 5 | $23,231 | $19,640 | $21,478 |
| 10 | $61,453 | $43,030 | $51,925 |
| 15 | $124,341 | $70,886 | $95,089 |
| 20 | $227,811 | $104,061 | $156,278 |
| 25 | $398,050 | $143,570 | $243,022 |
| 30 | $678,146 | $190,624 | $365,991 |
15% of $3,000: $450/month
| Years | ETF (S&P 500) ~10% | High-Yield Savings ~3.5% | Pension Fund ~7% |
|---|---|---|---|
| 5 | $34,847 | $29,460 | $32,217 |
| 10 | $92,180 | $64,545 | $77,888 |
| 15 | $186,512 | $106,329 | $142,633 |
| 20 | $341,716 | $156,091 | $234,417 |
| 25 | $597,075 | $215,355 | $364,532 |
| 30 | $1,017,220 | $285,936 | $548,987 |
At the 30-year mark with a pension-fund-style 7% return, 10% savings reaches roughly $365,000, while bumping up to 15% gets you to approximately $548,000. Switch to an S&P 500 ETF averaging 10% and the numbers jump dramatically.
Growth Over Time: $300/month Across Vehicles
The line chart below illustrates how the same $300/month behaves differently depending on where you put it. The exponential curve of higher-return investments becomes strikingly visible after year 15.
10% vs 15% Savings: 30-Year Final Value
This bar chart puts the two savings rates side by side for each vehicle at the 30-year mark. The extra $150/month consistently produces 50% more wealth — regardless of which vehicle you choose.
Which Vehicle Should You Choose?
ETF (S&P 500 Index) — ~10% avg. return
Historically the highest-returning mainstream option. Fully liquid, low fees (0.03–0.20% expense ratio), and available through any broker. The trade-off is higher short-term volatility — you must be comfortable with 30–40% drawdowns during bear markets. Best suited for money you will not need for 10+ years.
High-Yield Savings Account — ~3.5% avg. return
Capital-protected and highly liquid. Great for an emergency fund or short-term goals. However, the real return after inflation is often near zero or slightly negative. Not a wealth-building tool on its own, but an essential part of a balanced strategy.
Pension Fund — ~7% avg. return
Managed, diversified, often with tax advantages. Returns are typically lower than pure equity because pensions include bonds and alternatives. The main benefit is disciplined, long-term investing with a tax shield — especially powerful in countries with deductible contributions.
Interactive Savings Calculator
Adjust the sliders below to model your own situation. Change your income, savings rate, expected return, and time horizon to see what "paying yourself first" could mean for your future.
Total Invested
$108,000
Final Portfolio Value
$365,991
Interest Earned
$257,991
239% return on contributions
The Verdict: Does 10% Still Work?
Yes — but with a caveat. Ten percent is a floor, not a ceiling. In Clason's era, there were no index funds, no compound-interest calculators, and no zero-commission brokers. Today you have access to tools the richest Babylonians could never dream of.
If you can stretch to 15% or even 20%, the numbers speak for themselves. The key insight from the tables above is that the savings rate you choose matters far more than which exact vehicle you pick. The best strategy is the one you can stick with for decades.
- Start at 10% — it is achievable on almost any income and builds the habit.
- Automate it — set up a standing order the day your salary arrives.
- Increase by 1% each year — you will barely notice, but the long-term effect is dramatic.
- Use the right vehicle — high-yield savings for your emergency fund, pension for tax efficiency, ETFs for long-term growth.
A hundred years after The Richest Man in Babylon, the first law of gold is as relevant as ever. The only question is whether you will apply it.