How much money should I have in savings?
Experts agree that having at least 3 months’ worth of expenses in your savings account is a good strategy.
This will essentially constitute your rainy day fund, also known as an emergency fund. It can act as a financial safety net in the event of unexpected expenses and potentially help you avoid resorting to loans or credit cards. For example, you could use your rainy day fund to help pay for a medical emergency or car repairs.
Of course, you can also save for specific desires or goals. Perhaps you’d like to purchase a new car or have some money set aside to help pay for college. Or maybe you’re forward-thinking and want to start investing money for your retirement.
No matter what your goals are, we have advice and strategies to help.
However, keep in mind that there isn’t a single answer that applies to every person, some like to use a Savings Calculator. How much you should have in savings depends mainly on your personal circumstances.
Personal factors that contribute to how much you should have saved include:
- How much you earn
- Your expenses
- Your financial goals
The 50/30/20 rule
First introduced by Senator Elizabeth Warren, this 50/30/20 budgeting rule divides up your after-tax income into three spending buckets:
- 50% for needs
- 30% for wants
- 20% for savings or paying off debt
Let’s take a closer look at each of these categories.
Spend 50% on needs
In simple terms, needs refer to unavoidable expenses. Ideally, 50% of your after-tax income should be enough to cover these fundamental expenses.
Needs may be:
- Rent/mortgage
- Food
- Utilities
- Transportation
- Basic clothing
- Debt payments
- Medical care
Spend 30% on wants
According to this rule, you can use 30% of your after-tax income to purchase things you want. These are items or experiences that you could live without but choose to spend your money on.
Wants may be:
- Entertainment
- Luxury clothing
- Jewelry
- Gym membership
- Vacations
- Restaurant dining
- Expensive technology
Save 20% of your earnings
Now that you’ve tackled your spending, it’s time to focus on your savings goals. This category involves allocating 20% of your after-tax income towards achieving your savings goals or paying off debt.
This includes money for investing, building up your emergency fund and creating substantial retirement savings. You may want to deposit money in a high-yield account, open an IRA, invest in index funds, buy savings bonds or take advantage of other opportunities to save.
Sample budget for the 50/30/20 rule
To determine how much you need for each category, multiply your after-tax revenue by the target percentage.
Here’s what your 50/30/20 budget should look like if you’re earning the median monthly salary for your age group:
Age group |
Median monthly salary |
50% needs |
30% wants |
20% savings |
20-24 |
$2,722 |
$1,361 |
$817 |
$544 |
25-34 |
$3,990 |
$1,995 |
$1,197 |
$798 |
35-44 |
$4,812 |
$2,406 |
$1,444 |
$962 |
45-54 |
$4,876 |
$2,438 |
$1,463 |
$975 |
55-64 |
$4,859 |
$2,429 |
$1,458 |
$972 |
65 and up |
$4,253 |
$2,126 |
$1,276 |
$851 |
How much does the average person have in savings?
Are you looking to compare what you’ve set aside to others in the country?
Here’s the average savings account balance by age group:
Age group |
Average savings balance |
Under 35 |
$11,200 |
35-44 |
$27,900 |
45-54 |
$48,200 |
55-64 |
$57,800 |
65-74 |
$60,400 |
75+ |
$55,600 |
This data comes from the Survey of Consumer Finances conducted by the Board of Governors of the Federal Reserve System.
As previously mentioned, your situation could be vastly different from the average person, and factors like your DTI can affect how much you can set aside. No matter what your financial reality is, it’s crucial to have a well-funded savings account to handle any emergencies.
According to the Federal Reserve’s 2022 Report on the Economic Well-Being of U.S. Households, 68% of Americans would need to borrow money to cover an unexpected bill of $400. Simply put, if you can reliably cover a surprise $400 expense, you’re already in better shape than a third of Americans.
How much money should I save for retirement?
When preparing for retirement, most experts recommend setting aside 10% to 15% of your pre-tax income per year.
Your retirement savings may include money stashed in a 401(k), Roth IRA, traditional IRA, pension fund or some other type of retirement account.
To better visualize ideal targets for retirement savings, it can help to break it down into goals based on your age group.
Retirement savings goal by age
Use the table below to determine savings goal by age and how much you should put away for retirement based on your age group:
Age group |
Retirement savings goal |
20-29 |
$84,999 |
30-39 |
$324,528 |
40-49 |
$719,598 |
50-59 |
$790,344 |
How much money should I save for emergencies?
As we mentioned previously, give yourself a strong safety net by setting up a rainy-day fund with at least three months’ worth of expenses in it.
Expenses include rent, groceries, utilities, healthcare and transportation costs. To figure out how much you need, simply calculate how much you’re spending each month and multiply that sum by 3.
Saving for other goals
It’s quite likely that you have financial goals other than just preparing for your retirement.
Some common financial goals include:
- Paying or preparing for college tuition.
- Obtaining professional training/certifications.
- Purchasing a home.
- Purchasing a vehicle.
- Taking a vacation.
You can stay on target by opening a savings account. In doing so, you can mark it as an account that’s specifically for your intended goal. Even better, having a separate account can help you resist any urges to spend money by keeping your savings distinct for your day-to-day checking account.
How to stay on track with your savings
One of the best ways to stay on track is to maximize your earnings and minimize your expenditures.
Admittedly, that’s sometimes easier said than done. However, there are some actions you can take to help reach your savings goals.
Some tips for you to stay on track include:
- Start as soon as possible.
- Take advantage of your employer-sponsored retirement plan.
- Set up automatic transfers from your checking account to your savings account.
- Pay off what you owe as quickly as possible.
- Build an investment portfolio.
Another way to maximize your savings is by opening a high-yield savings account. Banks offering this type of savings account include Amex High Yield Savings Account with 4.25% or Capital One 360 Performance Savings Account also with an APY of 4.35%. Other options include Ally Bank savings account with 4.35% APY, Marcus by Goldman Sachs savings account with slightly higher APY at 4.40% and SoFi savings account with a 4.50% APY. If you’re looking for even higher interest rates, UFB Direct savings account has an 5.15% APY and Western Alliance Bank savings account has a slightly higher APY of 5.24%.
Other high-yield savings accounts:
It’s also helpful to check your balances regularly and share your goals with other people. For in-depth advice and guidance, consider working with a financial advisor or a financial planner. While it may sometimes seem challenging to save money, remember that you’re investing in yourself and your future.
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