There are many reasons and methods to save money, but figuring out how much you should have saved by a certain age can be tricky due to various factors. Life can change quickly; for instance, having a baby can cost between $5,000 and $14,500, and raising a child is even more expensive. If that child goes to college, you’re looking at costs ranging from $40,000 to over $100,000.
Another reason to save is that people are living longer. A 2019 survey shows that only 36% of American workers are very confident they can retire comfortably. Globally, the number is just 29%. Additionally, only 37% to 41% of Americans could cover an unexpected $1,000 expense, according to Bankrate’s annual surveys. The Federal Reserve notes that 30% of Americans can’t cover a $400 emergency, and nearly one in five have no emergency savings at all.
The average American household has $5,300 in savings, but this varies by age and household size. For those under 35, the average savings account balance is $11,200. It’s generally recommended to have three to six months of expenses in an emergency fund, or at least $1,000 for unexpected costs. Employer-sponsored retirement funds like IRAs or 401(k)s are good options for long-term savings, with the average 401(k) balance for ages 20-29 being $10,500.
For ages 35-44, the average savings account balance is $27,900. At this stage, it’s wise to have three to six months of savings and consider diversifying investments. The average 401(k) balance for ages 30-39 is $38,400. For those aged 45-54, the average savings account balance is $48,200, and by age 50, it’s recommended to have six times your annual salary saved if planning to retire at 67. The average retirement savings for ages 40-49 is $93,400.
Americans aged 55-64 have an average savings account balance of $57,800. As retirement approaches, it’s crucial to increase savings. People over 50 can contribute an additional $6,500 to their 401(k) annually. The average retirement savings for ages 50-59 is $160,000, but withdrawing before age 59.5 may incur tax penalties.
Savings peak for Americans aged 65-74, with an average balance of $60,400, but this drops to $55,600 for those over 75. This decline highlights the importance of budgeting for retirement. The average retirement savings for ages 60-69 is $182,100.
To reach savings goals, start by analyzing current expenses and creating a monthly budget. Track spending to identify areas for cuts. A tool like SoFi Relay can help by connecting all accounts to one dashboard for real-time tracking.
After reviewing expenses, consider the 50/30/20 rule: 50% of after-tax income for essentials, 30% for discretionary spending, and 20% for savings. Direct deposit into savings or retirement accounts can also help.
If saving is tough, consider earning extra income through part-time work or freelance gigs. Investing with platforms like SoFi Invest can also grow savings, offering options like stocks, ETFs, and crypto.
Saving for the future requires a bit of planning and diligence. By analyzing expenses, setting a budget, and exploring additional income or investment opportunities, you can build a solid financial foundation for the future.