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Saving money can help you reach financial goals, like purchasing a home or building an emergency fund. But how do you know if your savings is on track? One way is to use age as a guide and compare your savings to the average amounts Americans of different ages have saved.
Average Savings by Age Breakdown
Savings is money set aside for planned spending or, in the case of an emergency fund, to pay for unexpected expenses. Pinning down average savings by age isn’t an exact science because everyone’s financial situation is different. Someone with a higher income and lower expenses may have an easier time saving than someone earning a lower income or paying off significant debt.
The Federal Reserve tracks savings in the U.S. by breaking it down into money Americans keep in “transaction accounts” and “time deposit accounts.”
Transaction accounts allow the account owner to make deposits or withdrawals fairly easily. Examples of transaction accounts include:
- Checking accounts
- Savings accounts
- Money market accounts
Time deposits are different, as they typically don’t allow for the movement of money in and out of the account once it’s been opened. The best example of a time deposit account is a certificate of deposit (CD), which can hit you with stiff penalties if you withdraw your money too soon.
According to the Fed’s most recent Survey of Consumer Finances, the average transaction account balance was $41,600 in 2019. Meanwhile, the median balance for checking and savings combined was $5,300.
Here’s a closer look at the average savings by age, according to Fed data.
Average Savings by Age 25
The Federal Reserve doesn’t provide a specific metric for savers in their 20s. Instead, it compiles savings information for Americans under 35.
The Fed’s most recent numbers show the average savings for the age group that includes 25-year-olds is $11,250. The median savings is $3,240.
Having relatively modest savings in your 20s is nothing unusual if you are still in college or have recently graduated. You may be starting an entry-level job with a lower salary and paying off student loans.
It’s not too early to work on building savings, however. For example, you could open a high-yield savings account for emergencies, enroll in your 401(k) at work or make monthly contributions to an individual retirement account (IRA). Saving even small amounts can work in your favor because you have lots of time to capitalize on the power of compound interest.
Average Savings by Age 30
The Federal Reserve doesn’t specifically collect savings data about people who are 30. Again, it lumps together everyone under 35.
The Fed’s most recent numbers show the average savings for the age group that includes 30-year-olds is $11,250. The median savings is $3,240.
If you’re in your 30s, you may have some advantages that could help you to grow your savings. For example, you may be closer to paying off student loans or have moved into a higher-paying job.
At age 30, it’s important to consider the goals you’re working toward financially. Perhaps you’re aiming to:
- Fully fund your emergency savings
- Start saving for retirement if you haven’t already
- Save money toward a down payment on a home
Setting goals can help you decide how to best allocate your income, based on your priorities. You can also look for opportunities to accelerate your savings efforts.
For example, say you get a 2% annual raise in salary. Instead of spending that money, you could increase your 401(k) contribution by 2%. That’s an easy way to save more without having to revamp your budget.
Average Savings by Age 40
Americans at this life stage are reflected in Federal Reserve statistics covering people ages 35 to 44.
The Fed’s most recent numbers show the average savings for the age group that includes 40-year-olds is $27,900. The median savings is $4,710.
By your 40s, you’re likely in your peak earning years and may have more money to put into savings. At this stage, your goals can look different. Saving for retirement may be more important than adding to your emergency fund.
Rather than saving, you may be focusing more on investing, which can yield higher returns. Diversifying your investments can help you to manage risk when putting money into the financial markets.
How Much Should I Have in Savings?
The amount of money you should have in savings depends on your financial needs and specific situation. A popular guideline for emergency savings is to set aside three to six months’ worth of expenses. This should theoretically be enough to cover your bills until you can get back to work.
Finding the right amount to save means looking closely at your expenses to figure out roughly how much money you need to live on each month. You can then take that amount and multiply it by your target number (that is, three months, six months, etc.) to decide how much to keep in savings.
Why You Should Save
Saving money is important for a few reasons, starting with the peace of mind it can provide.
If your car breaks down or your pet gets sick, having money saved means you can pay for those unexpected expenses without scrambling to come up with the cash. An emergency fund can also help you get through an extended financial crisis, such as a job loss or an injury that prevents you from working.
Having savings can help you avoid going into debt if an emergency comes along. Charging doctor bills or everyday expenses to a credit card can be convenient—but it creates debt you have to repay. If you’re stuck with a high APR credit card, the interest could make those charges more expensive.
Finally, saving money can be a good thing if you’re earning a great rate. The best high-yield savings accounts typically pay a competitive APY without any fees. The higher your rate and the more consistently you save, the more your money can grow over time.
How to Start Saving Faster
If you’re ready to speed up your savings, your budget is a good place to start.
Going through your expenses one by one can help you find opportunities to save money instead of spending it. The more unnecessary expenses you can cut, the more money you can funnel into savings instead.
You can also save faster by taking advantage of automated tools. Setting up recurring transfers from checking to savings each payday can help you grow your balance painlessly. You could also automate deposits to an IRA if you’re saving for retirement.
Found money can also help you grow your savings. Found money is any money you weren’t necessarily expecting, including:
- Tax refunds
- Refunds on store purchases
- Cash birthday or holiday gifts
- Credit card cash back
A word of caution about using cash back from credit cards to save. Carrying a balance on your card and paying interest each month will detract from the value of any cash rewards you earn.
Where Should You Keep Your Savings?
The best place to keep savings is somewhere that’s accessible, offers a great interest rate and charges few or no fees. Online savings accounts generally fit all three criteria: You can link external banks for easy transfers, they offer competitive rates and they tend to be fee-free.
You might consider opening a money market account if you’d like a debit card or check-writing capabilities. Many of the best money market accounts include these features. Having a debit card or being able to write a check can save you from having to wait for a transfer between accounts to clear.
Certificates of deposit are a savings option that might be right for any money you know you won’t need right away. When you put money into a CD, you generally can’t withdraw it before maturity—the end of the CD’s term. If you do make an early withdrawal, you may forfeit some or all of the interest you’ve earned.
Measuring your savings progress against the average savings by age can help you get some perspective on your finances. But keep in mind that your ability to save may be different from someone else’s. Different factors can influence how much someone has saved in their 20s, 30s, 40s and beyond. The important thing is to make saving a regular part of your financial routine.
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