If you’re wondering how much you should have in savings, you may know that many financial experts feel three to six months’ worth of living expenses is vital. That said, you might also be curious if more cash in the bank equals a great sense of security and wellbeing.
Despite the saying that money can’t buy happiness, research indicates that having cash can indeed enhance one’s sense of wellbeing. A study conducted at the Wharton School of Management at the University of Pennsylvania found having more dinero does boost your positive feelings.
So with that in mind as well as your financial security, here’s a closer look at how much you should have in savings to get those good vibes going and give you a sense of security during uncertain times.
Why Should I Have Savings?
You want to be financially savvy, right? Most people do. But a startling 12% of Americans have no savings, according to a recent YouGov survey. Another 13% say they have less than $100 and 14% indicate they have between $1,000 and $4,999.
A savings account helps you avoid going into more debt and prepare for unexpected emergencies. Imagine if your car had a major breakdown, or your cell phone was trampled on during a weekend outing. How would you afford the unpredictable repairs?
An emergency fund stocked with extra cash can help you avoid taking out personal loans or using a credit card to cover an unexpected expense. And while emergencies are never fun, it might help you feel a little bit better knowing that you’re prepared.
How Much Money Should I Have in Savings?
If you don’t have much in savings, where exactly do you start? A general rule of thumb is to have three to six months of living expenses saved up. But keep in mind that your living expenses may increase as you age, as you start growing your family, have mortgage payments, or are saving for retirement.
But that is still a good figure to aim for. Once you figure out your bare minimum monthly expenses and multiply it by three or six, you can calculate how much to aim for and get that sum saved.
It’s worth noting that some money experts say 10 times your monthly expenses may be a wiser amount of a cash cushion to stash away.
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How Much Money Should I Have in Savings by Age?
Now, here’s a look at how much to sock away in savings based on your age.
18-24: At Least $500 in Savings
Being a college student or recent grad is expensive. It’s hard to keep up with tuition and rent. However, as a college student, you can try starting with $500 in emergency savings and working your way up.
A $500 emergency fund is a great place to start for young people whose expenses are typically less than older Americans. Even just saving $10 per week can help you reach your goal in about a year.
20s: 3-6 Months of Expenses in Savings
After graduation, you’re figuring out the real world for the first time. Most post-graduates are determining how to pay back student loans, and maintain new living expenses. It may help to break down your larger goal of three to six months’ worth of living expenses into first saving $1,000 in your emergency fund.
This can help you feasibly achieve your savings goal while preparing for most emergencies with a sum of cash on hand. You might want to try automating your savings and having a small amount transferred from your checking account on payday to build up your reserves.
30s: 6+ Months of Expenses in Savings
By the time you reach your thirties, ideally you’d have at least six months of expenses saved. At this point, you may even be questioning if you should invest more or continue to save. An easy way to determine how much you need to save is to create a budget of your basic living expenses.
How much do you need to survive in the case of job loss or a medical emergency? A savings account of at least six months of your usual expenses can help you feel safe enough to cover rent, utilities, and food while you get back on your feet.
40s: 6+ Months of Expenses in Savings
How would you survive if faced with a job loss? According to the Center on Budget and Policy Priorities, unemployment benefits vary state-to-state, but many states give up to 26 weeks in benefits.
However, the amount you receive might not be on par with what you are earning, so consider alternative safety nets. As an example, in New York, which can have a high cost of living, unemployment benefits may range from $100 to $500 a week.
When you’re in your 40s and 50s, replacing your income may prove to be more difficult as you search for positions with more work experience. If the government covers roughly six months of unemployment, then you’ll likely want to have at least that much and then some in your own savings.
50s: 6+ Months of Expenses in Savings
If you are in your 50s and wondering how much to have in savings, the answer again is at least six months’ worth of living expenses and ideally significantly more. For many people, this is their period of peak earnings. They may have multiple expenses as well, such as a mortgage, children’s education, and eldercare.
Given these pressing concerns, you want to make sure you have a cushion if you were to face an emergency like job loss. What’s more, you don’t want to tap your retirement savings, which can trigger steep early-withdrawal penalties.
Where Should I Put My Savings?
If you’re building up an emergency fund, then placing your savings in an account that can be easily accessed, like a savings account, is probably ideal.
Retirement Accounts
Putting your savings into a 401(k) or mutual fund might not be the best place for this purpose because these accounts are not very liquid. In other words, you can’t easily access the money when you need it.
Plus, withdrawing early from accounts specifically set up for retirement may come with penalties and hefty fees if you are under the age of 59.5. In addition, these funds may not be insured unless they are a self-directed account, which can include.
Investments
Investments can offer a place to grow your savings at a healthy rate of return. However, this money will not be insured, and you could face losses if the market drops. That could leave you vulnerable if you needed to access money at that moment. You might look into short-term vs. long-term investments if you do want to go down this path.
Savings Account
Savings account can provide a secure place to store your savings. There are different kinds of savings accounts to consider, and you may find varying rates of return depending on the annual percentage yield (APY) offered and how often compounding occurs.
When comparing traditional vs. online banks, you may find that the latter, since they don’t have brick-and-mortar locations, may offer better rates and lower fees.
Recommended: Use SoFi’s savings account interest calculator to see how much your money can grow over time.
Checking Account
While a checking account is a secure, typically FDIC-insured place to store your savings, it’s really designed to be more of a place for paying bills and saving. You likely won’t earn much interest.
Cash
While cash is perhaps the most liquid of ways to store your money, it can’t promise security. You could be robbed or could lose your money. That’s not what you want to happen to your nest egg!
Here is this information in chart form:
| Location of Savings | Rate of return? | Insured? |
|---|---|---|
| Retirement | Variable | Maybe |
| Investments | Variable | No |
| Savings | Low to moderate | Yes |
| Checking | No to low | Yes |
| Cash | None | No |
How Much Does the Average American Have in Savings
While you’ve now read the advice to have three to six months’ worth of living expenses stashed away, many Americans are not hitting that goal.
According to the Federal Reserve’s Board Survey of Consumer Finances, here are the average savings:
• Under 35: $11,200
• Age 35-44: $27,900
• Age 45-54: $48,200
• Age 55-64: $57,800.
Building Up Savings More Quickly
Convinced you need more savings, and a traditional savings account just won’t cut it? Here are a couple of ways to help build up your savings faster than a savings account alone.
Selling Your Stuff
Take inventory of things in your garage or closet that you can sell. There are several buy/sell apps out there that can make it easier to sell your unwanted items, and many places where you can sell your stuff and recoup some money.
Any money you make off of your items can be thrown into your savings account. This method is a win-win because you get rid of things you aren’t using, and you can build up your savings without changing your spending habits.
Cutting Out Unnecessary Spending
Want to make significant strides with your savings habit? It might be time to look at your expenses and cut out unnecessary spending.
There are several things you could change, even if it’s just temporary. Replace your $100 per month gym membership by exercising with free, full-length workout videos online. Cut out your cable expense and go all-in with a cheaper Netflix subscription.
How a Budget Can Help You Save
Yes, the dreaded budget. Actually seeing how much you spend each month in a written budget can help you save. When you track your monthly income and expenses, you can quickly identify what areas of life are costing the most so you can make adjustments.
An online budgeting tool like SoFi’s can help you track your spending, which can help you see where you might be able to trim some fat from your expenses.
If you’re looking for a checking and savings account where you can spend, save, and earn all in one product, consider SoFi Checking and Savings. You’ll earn a competitive APY and pay no account fees, both of which can help your money grow faster.
FAQ
How much should a 30 year old have in savings?
How much money should you have in savings at age 30 will vary, but they should have at least three to six months’ worth of basic living expenses saved. Some financial advisors suggest that you should have the equivalent of one year’s salary (gross) saved.
How much does the average person have in savings?
Savings vary person to person, and with age. Currently, the average American under age 35 has approximately $11,200 saved.
Is $20000 a good amount of savings?
Whether $20000 is a good amount to have saved will depend on a few factors. If you are a single recent college grad, it could be a very good starting point for an emergency fund. Or if you are a professional who takes home $5,000 a month, you are well on your way to that three to six months’ worth of expenses you want to have in your emergency fund. However, if you are a person who is about to retire and has several dependents, then the amount is less positive.
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