Labour made an election promise to more than double the amount people can keep from £24,000 to £50,000.
Social Services Minister Rebecca Evans said the limit would rise to £30,000 in 2017 as a first step in the process.
"This frees up more of people's money for them to use as they wish," she said.
The Welsh Government estimates up to 4,000 people currently pay the full cost of residential care and up to 1,000 of them could benefit from raising the limit to £50,000.
Meanwhile, Army veterans will have their war disablement pensions totally disregarded when councils assess charges for social care, Ms Evans added.
People moving into residential care will be able to keep more of their savings from April, the Welsh Government has confirmed.