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How Can Percentages Help You To Save Money?

How Can Percentages Help You To Save Money?

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For anyone who despised maths, it might come as a surprise that mathematics is one of the more popular subjects at school. About 46 percent of students polled said they liked maths compared to 24 percent who disliked it.

Yet, many of the lessons learned in maths classes at school get abandoned quickly. Long division and calculus have little use for most people in everyday life. And fractions are forgotten quickly after graduation.

Percentages though are used every day. A basic understanding of how to calculate percentages can make some transactions simpler, and you may save money also.

How will understanding percentages improve your finances?

Being able to calculate percentages means you will understand the final cost of a discounted item. Percentages are used to show discounts, or interest hikes in borrowing.

In recent times, you will have seen percentages being linked to the cost of living crisis, and mortgage rate rises. Working out percentages needn’t be difficult either.

Mortgage providers offer online calculators to understand repayments and interest for instance. Using a free percentage calculator online could mean the difference between getting a bargain in the sales, or being misled into making a bad purchase.

But, many people don’t know how to use percentages

After leaving school, many students move straight into full-time employment. Subjects such as French or art may be forgotten about, and the same happens with algebra and other maths lessons.

According to The Guardian, one in five adults cannot calculate percentages. Fractions, and working out averages are also a problem. By the way, one in five equals 20% but you already knew that.

How to work out percentages

Realistically, most people will use their smartphone’s calculator to work out percentages. But, it’s a handy skill to know the formula for calculating percentages.

How to calculate savings on an item

Assume you are in the sales and you see a £500 laptop with an 80% reduction (go with it, maybe it’s Black Friday).

1) Divide the discount; 80% by 100 to get 0.80. Multiply 0.80 by the original price – in this case, £500 to see how much you will save.

2) Therefore, the formula reads 0.80 * 500 = 400.

3) Minus 400 from 500 to leave 100. This is the sales price of the laptop – £100. Nice bargain if you can find it.

This formula can be used to calculate any percentage from any number. And it might save you money in the following ways.

Budgeting for the household

US Senator, Elizabeth Warren, wrote something called the balanced money formula in 2005. Despite being designed for the American public, this rule is a good basis for any household budget.

If you want to stop spending money and start saving, then you’ll need to have a grip on your finances. Elizabeth Warren’s rule states that income should be divided into 3 groups; 50%, 30%, and 20%.

50% Goes to needs

The majority of your household income should go toward essential items. This means food, utility bills, rent, and the like.

30% Goes to wants

The next largest part of your income; 30% should be allocated to less essential items. Use this part of the budget to pay for occasional takeaways or dining out.

20% Goes to savings

And lastly, 20% of all available income should be put into savings. This simple use of percentages helps to provide a budget for managing household income.

Discounts in retail stores

At sales time, stores often proudly display signs saying X% off all items or similar. When the prices are displayed on sales items there is no confusion. But, bargain buckets and the like often contain numerous items all to be discounted under a blanket percentage, say 30%.

When this occurs, you will be able to use the formula you learned earlier along with your smartphone to quickly work out the cost of any sales item. This is a handy trick for not overspending or being caught out at the checkout.

Mortgage rates and other borrowing

Most people use mortgage advisers when they buy homes or refinance. This is wise and should be recommended. However, understanding percentages will make mortgage rates and payments easier to comprehend.

Many homeowners have been caught out when interest rates have risen unexpectedly. Having a grasp of percentages and how much your repayments could be during inflation will help you to choose the best mortgage deals.

Percentages are used to explain APR and interest rates for savings accounts too. In the UK, about 5 million people owe more than £10,000 in loans and credit cards. Understanding percentages can help to switch to better deals and save money and help to pay off credit card debt.

Credit card companies demand a minimum monthly payment. This is often 2%. This repayment will get you nowhere. Work out an affordable percentage you can repay, and your debt will lower far quicker.

In-game purchases

Even video games use percentages. Due to the controversy behind micro-transactions and loot boxes, games are becoming more transparent. When a gamer chooses to make an in-game purchase they can view the likelihood of a particular item dropping. This is always displayed as a percentage. The lower the percentage, the less chance the desired item will appear.

Understanding the likelihood of certain items appearing helps gamers to make informed purchasing decisions.

Using percentages in daily life

Understanding how percentages work can make it easier to calculate budget changes when the price of food rises. In the year leading up to October 2022, the cost of consumer goods and services rose at the fastest rate in 40 years.

Percentages help to spot when an item is a genuine bargain, or misleading. For instance, if a product displays a 25% larger sticker, does the pricing reflect that? Are there any actual savings to be gained, or has the price increased 25% too?

Leaving tips

Being able to calculate percentages quickly can help in restaurants when paying bills and working out a tip for your server. And, percentages come in handy when on holiday.

Calculating sales tax

Some countries such as the US don’t display sales tax on their goods. In the UK, prices must be displayed accurately, but in the States, things are a little different.

Sales tax might be added to retail purchases in the US. So, understanding how to calculate this when shopping means you’ll have an understanding of the final cost before you check out.

Improving diet and nutrition

Ingredients are often displayed on food items with the RDA printed next to them. This is used so consumers are able to determine whether they are ingesting too much salt for example, or not getting enough calcium.

This way of using percentages can help anyone wanting to make lifestyle choices regarding their nutrition and vitamin intake. And it’s especially useful for anyone who has to avoid certain ingredients due to health concerns.


Perhaps you found maths boring when you were in school. Maybe percentages and fractions were less interesting than sports or art. But, a basic understanding of percentages can help when consolidating debt, or managing the family budget.

Percentages are used every day without much thought. Tips are given to waiters. Discount vouchers are applied to online purchases. And video gamers use percentages to weigh up purchasing decisions.

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