By George Reed on June 13th, 2019
Many people want to achieve stability and financial independence in their lives. In order to get this, you need to become an organized person and have a savings routine. If you are reading this, chances are you haven’t implemented this routine yet. However, it’s good that you are searching for guidance and willing to find the answer to “how much money should I have in my savings account?” In other words, the following guide will help you understand the basics of financial management and how much should you have in savings at a different age.
Reasons for Saving Up Money
A lot of young people start thinking about their future as well as about retirement. They ask themselves, “How much money should I have saved by 25?” The reasons for that are that they want to protect their life from unexpected expenses and save for retirement. Of course, some young people want to purchase a car or a house or save for an upcoming wedding. However, the first two reasons are the most obvious and the most important.
According to the Boston College Center for Retirement Research, over 50% of American citizens need to lower their living standards during retirement, and only 20% of young people are sure that their retirement will be comfortable enough. Also, less than 40% of Millennials would be able to cover an unexpected expense of $1,000 and many of them tend to take out online personal loan for that.
You Need to Prioritize
Every person wants to stay on track with their finances but no everybody knows the basics of saving and how much money should you have in savings. It’s so easy to fall behind especially when you’ve graduated recently and still have a student loan to pay off. How much should I have in savings at 25 if I don’t have a stable job? How much should I save per month to feel comfortable in the future?
First of all, you need to prioritize. There will always be multiple expenses to take care of – you need to purchase health insurance for you and your family, repair the house, buy a new car, or call the doctor for your child. The expenses are endless but you don’t have much time to save for your retirement so it’s necessary to start planning right now.
How Much Money Should You Have Saved by 25?
On average, financial experts suggest you need to have in savings at least three to six month’s worth of expenses so that you will be able to stay financially afloat if something bad happens. In order to calculate your average savings by age 25, you may opt for online calculators. It all depends on your particular situation, your average salary and whether you have a steady income.
In 2017 the average salary for people between the age of 25 and 34 was about $40,196. So if you save about $580 per month, you will have about $40,000 in five years. As for the emergency fund, the experts suggest to calculate it the following way. First add all the average expenses for housing, food, transportation, health care, utilities and installment loans or credit card debt. It may be approximately $3,456 per month. If you multiply this figure by three to six, you will get your emergency fund. In this case, it would range from $10,268 to $20,736.
How Much Money Should You Keep in Savings
- If you are in your 20s – remember that this is your perfect time for saving up. How much should you have in savings at 25 depends on your average income? Of course, this is the time you’ve graduated and probably haven’t landed your dream job right away. You may even switch a few jobs until you find a more steady option. However, the average savings of a 25-year-old should minimum include 10-25% of the after-tax salary. At the same time, you still need to pay your student loan off. There are pros and cons of payday loans for financial emergencies but, in general, you need to count on yourself and save up.
- If you are in your 30s – you’ve probably found a steady job by this time and can continue accumulating money for your retirement. How much should you have in savings at 30? Financial coaches say you need to have a minimum one year’s worth of expenses in your savings account.
- If you are in your 40s or 50s – you may have a temptation to give up trying. However, just think about the nearest future when you won’t have to work anymore and will be able to enjoy the fruits of your labor. Keep doing the hard work and saving up for your retirement. How much money should you have in your savings account depends just on you?
- If you are in your 60s – Congratulations! Once you’ve saved up 10-20X your annual living expenses, it’s time to enjoy your life and forget about work. Now your life is finally debt-free and you don’t need to pay a mortgage.
There is only one way to become a financially-independent person and enjoy your retirement – live within your means and save up as much as you can.