How Much Should I Have in Savings?

From unexpected disasters to saving up for a dream vacation or home, a savings account is something everyone should have. 

However, savings can be scary. Depending on your age, you may be thinking, “what if I don’t have enough? What will I do if something happens and I don’t have the money to cover it?”

There is no one-size-fits-all answer, as each age group has its limitations and advantages concerning savings.

Below are some suggestions for where you should be savings-wise – and how to get the recommended savings by age if you aren’t quite there yet.

Saving in Your Twenties

Being in your twenties is a complicated and constantly changing time. In just a few years, most people go through moving out, going to (and possibly graduating) college, and beginning their careers. And then, some may suddenly pause and wonder, “how much should I have in savings?”

Saving money during your twenties is the most challenging time of life to do so. Typically, there’s a house payment, a car payment, rent, or student loans to pay back, so having anything in savings seems impossible. 

There are, however, some clever ways to add money to savings in this era of your financial portfolio, and most financial institutions can help you find a baseline for your individual needs. 

The general opinion of most is: 

• Have at least 1x your income in a savings account by age 30
• Three to six months worth of living expenses should be readily available in case of emergency

Do not panic if you aren’t at that place yet – it is never too late or early to start saving.

Retirement

The most important thing to begin saving for in your twenties, though, is retirement. It may seem far off in the future, but even the tiniest bit can help. 

So, you might wonder, “how much money should I save?” Since most careers begin in a person’s twenties, it is the perfect time to start investing in retirement savings – about 5%-15% of income is the ideal amount.

If saving for retirement starts at age 25 at 5%, at age 65, that amount could be up to $531,607. At 10%, that goes up to a possible one million. 

That said, sometimes saving even 5% isn’t possible in your twenties. It’s completely normal to start at a lower percentage and gradually work up to a higher one. 

Here are some tips to increase your retirement savings: 

• Sign up for your employer’s 401K plan, if eligible 
• Manage debts
• Track spending 
• Invest in stocks

Saving for retirement is one of the most financially beneficial things you can do. It will help your financial future as well as your family’s. 

Emergency Funds

Although you should have one at every age, having an emergency savings fund is incredibly necessary for your twenties. 

An emergency fund can be life-saving in a healthcare emergency, a lost job, or an unexpected home expense. 

To have a helpful emergency fund, you should: 

• Try having the emergency account in an interest-earning bank account
• Make the fund accessible to avoid early withdrawal fees

The importance of an emergency fund was at its most relevant in 2020 during the COVID-19 pandemic. Hundreds of thousands lost their jobs and had no financial cushion. 

Taking proactive steps in your twenties can provide extra support during a crisis like COVID and reduce future financial anxieties. 

Investing in Your Thirties

The thirties period of life is just as dynamic as the twenties but tends to be more financially impactful on your future.

A lot of people start families in their thirties – and buy homes. These expenses are unpredictable, which tends to lead to fewer amounts of money deposited into savings.

The consensus of how much to have in your savings account in your thirties is one year of income.

An entire year of income dedicated to savings seems daunting if you consider expenses such as kids, possible student loans, and playing catch-up from your twenties. 

Some tips to help grow your savings in your thirties are: 

• Deposit money to savings each week
• Use automatic transfers
• Start with a small amount in your emergency fund and increase the amount given to retirement

Just like your twenties, your thirties should focus on your retirement fund. Gradually increase the emergency funds you have, but match the retirement percentage your job provides. 

Investments

The most impactful action you can take towards adding money to your savings account is investing. 

Investing in your 30s should almost entirely involve stocks. Since you still have around thirty to forty years until retirement, taking a risk with stocks is much more likely to benefit your savings than reduce them. 

Investing in stocks can return up to 10% of investment each year if done correctly. 

Some pointers on investing in stocks are: 

• Staying invested. The longer you keep up with the investment, the more of a return you’ll get 
• Have a diverse portfolio of stocks. Make sure they vary in size and cost
• If you’re married, invest with your spouse

Having a diverse portfolio of assets and investing intelligently in your thirties will grow your savings exponentially. The stock market may seem intimidating, but the benefits are worth the risk.

Buying a Home

The average American purchases a home in their thirties. Having a savings account dedicated to buying your first home is essential, along with: 

• Monitoring your credit score. Try to have a score that is around 760 or above
• Reassessing your emergency fund and making sure there is enough to cover your mortgage
• Depositing 20% of income into your savings fund for a down payment

Taking a look at your finances and spending habits is something you should often do in your thirties.

You should also have specific savings goals. Even if you do not meet the ideal 1x your income amount in your savings, you can still plan to contribute each week to your buying-a-house fund.  

Financial Success in Your Forties

Your forties are all about goals. Retirement is still twenty years away, but that does not mean you can slack on savings. 

Some specific actions to take in your forties are: 

• Assessing your life insurance
• Pay off non-mortgage debt
• Put an estate plan in place 

Your forties can be the most financially rewarding decade of life, as most people have purchased a home and settled down.

However, there are a few additional aspects that are almost exclusive to your forties.

Healthcare

Discussing healthcare, either your own or your loved ones, is never something you want to consider. But, in your forties, it is necessary to keep your savings on track. 

First, assess your parental situation – it can be awkward to ask about money, but you need to be sure that their finances are in order as they age. 

Consider your health. If you or your spouse have been diagnosed with a chronic illness or disability, you may want to think about saving for long-term care.

A healthcare savings account is a genius idea if you want to have money specifically for protecting against a health emergency. 

One of these accounts can: 

• Grow your savings without taxes after
• No withdrawal taxes
• Allow flexibility with a health insurance plan

Saving money for a sick loved one’s care or a personal illness is certainly not uplifting, but it can save you a lot of time and money in the long run. 

Career

At this point in life, you most likely have a steady job and income. But, what if you could make more?

Changing careers is the quickest way to increase your income. Assess your job description and your qualifications and double-check that you’re not overqualified for your current position.

Sure, a career change can be risky, but if it results in more savings and more income, the chance is worth it. 

If changing jobs is out of the question, you can always ask for a raise or strive for a promotion. 

Considering a career change can: 

• Provide you with more financial savings opportunities
• Increase your income with competitive salaries

Earning more income can also allow you to invest in more stock and deposit more into savings accounts.

Your forties are typically the most productive era of life financially, so maximizing income and savings is key to making sure you’re ready for your fifties and beyond.

Tools

Thanks to modern technology, there are plenty of tools to help your savings at any age. A few popular choices are below. 

Mint

Mint is a free application focused on budgeting and savings. You can customize your goals, get notifications when a bill is due, and keep track of every account in one place. 

Some other features of Mint are tracking cash flow and investments. Mint keeps track of every investment you make, including stocks. 

This app is ideal for people in their twenties as it keeps track of subscription services like Netflix or HelloFresh – which became even more popular with millennials during the pandemic.

Personal Capital

This app is perfect for savings in your thirties and forties, as it focuses on investments. 

Personal Capital allows you to: 

• Track spending
• Monitor 401(k) accounts and IRAs
• Keep up with mortgages

The app also provides personalized recommendations so you can stay on track with savings. 

Financial Advising

If you have no idea what to do with your money or are too busy to go through all of your accounts and spending, a financial advisor could be your best bet. 

A financial advisor goes through your finances and devises a plan for savings, and provides investment options. 

Individuals in their twenties and thirties can benefit from this, as it puts people on track and makes finances less confusing for those who are not naturally skilled at accounting.

Most banks offer financial advising, but some people also do it independently. Charges can go anywhere from $100/hour to $1000/hour for special projects.

Saving Throughout Life

Savings through the decades of life all have the same goal – to help you. Saving can feel overwhelming, so it’s important not to stretch yourself too thin. 

The answer to the question “how much should I have in savings?” is different for everyone depending on socioeconomic status, circumstances, and unexpected expenses. 

Even if you only contribute a small amount each month, you benefit yourself and your loved ones for their financial future. 

The most crucial aspects of saving that you should keep in mind are: 

• Do not panic if you are not at the “ideal” amount of money
• Try to make a budget each month and watch your spending 
• Things happen. Have an emergency fund that’s accessible and has plenty of cash available

Saving money at any age should not be a stressful experience – take your time, stay positive, and don’t compare yourself to your peers.