No matter your age, savings is a necessity. But depending on your age, the amount of savings you will need changes according to life stages and your overall financial landscape. One overarching rule of thumb is that you should — even in times of high inflation — have somewhere between 3-12 months of essential expenses somewhere safe like a high-yield savings account (see the best savings rates you can get here). But this depends on a lot of factors.
How much do Americans have in savings at every age?
According to data available from the Federal Reserve’s Board Survey of Consumer Finances, the median savings balance — not including retirement funds — of Americans under 35 is just $3,240, while that jumps to $6,400 for those ages 55-64.
This data is the latest available from this source but is from 2019, and some sources put average savings even higher: Northwestern Mutual’s 2022 Planning & Progress Study revealed that the average amount of personal savings (not including investments) was $62,086 in 2022.
While those numbers look high, remember this: Many Americans simply don’t have any savings at all. According to Bankrate data from January 2022, 56% of Americans would be unable to cover an unexpected $1,000 bill with savings. In other words, Americans are very much, in general, under-saved — even though those who do save are often saving enough.
How much should you have saved at every age?
The answer to this isn’t entirely straightforward, because pros say it really depends on your lifestyle, income, whether or not you have a mortgage, a car, dependents and more. “I tend to think the best measure of how much savings you should have factors in your expenses. This includes your family situation: Someone in their 20s without a spouse or kids who rent and ride public transportation probably has very different savings needs from someone in their 30s or 40s with two kids and a stay-at-home spouse and two car payments and a mortgage,” says Ted Rossman, senior industry analyst at Bankrate.
For his part, Rossman recommends having 3- 6 months of expenses for emergency savings. You might be able to go on the low end of this number if you have a two-income household, and on the higher end if you’re a one-income family supporting kids. “Also on the high end if you’re a business owner or in a field in which it might take an especially long time to find a new job,” says Rossman. Some pros, like Suze Orman, recommend even more; she says 8-12 months is better. (See the best savings rates you can get here.)
It’s also important for people to consider savings goals that may be separate from emergency savings. “Someone who aspires to buy a house within the next year or two should consider opening a separate savings account for that home down payment. Money intended for a relatively near-term goal like that probably shouldn’t be invested in stocks given the volatility,” says Rossman. But, it can also be helpful to separate it from your emergency savings, because it’s for a separate purpose and because research shows that people are more successful at saving when they have a separate account with a separate name.
One way to accelerate your savings? Set up a direct deposit amount from each paycheck into a separate savings account, says Chanelle Bessette, banking specialist at NerdWallet. “It becomes much less tempting to spend that money if it never hits your checking account. It’s natural to change your spending habits as you earn more money, but lifestyle inflation can sneak up on you, so try to keep an eye on how your expenses change as you age and course-correct if you find yourself spending beyond your means,” says Bessette.
- How to think about savings you need in your 20s
In your 20s, your financial priorities are much different than those of later generations. “People in their 20s may be just beginning their careers and earning entry-level income while tackling college debt. By making smart moves now, like spending wisely, automating savings and strategically contributing to your 401(k), you can enjoy the fruits of your labor today while securing a successful retirement in the future,” says Gabe Krajicek, CEO of Kasasa, a fintech company that provides community banks with financial products and services.
- How to think about savings in your 30s You’re likely more established in your career and earning more, which should make it easier to save. “Lifestyle creep and lifestyle changes can make a huge crack in your nest egg. Before making purchases, consider whether the spend aligns with your values and gets you closer or further from your long-term financial goals. It’s important to find areas where you can save, such as cutting down on eating out or skipping a streaming service. You should also be building an emergency fund, purchasing life insurance, adding to your 401(k) and working with a financial adviser to ensure you’re making wise investment decisions,” says Krajicek.
- How to think about savings in your 40s You probably have more assets and should focus on diversifying your investment portfolio and looking for additional streams of income. “If you’ve managed to lock in a mortgage at a low rate, rather than making additional payments, consider investing these additional funds into a rental property or other potential passive revenue streams. But first, pay off debt and maintain an emergency fund,” says Krajicek.
- How to think about savings in your 50s
Continue to increase your retirement savings and investigate long-term care insurance. This next chapter may be weighing more heavily on your mind, so evaluate your current trajectory and take steps to ensure you’re on the track you intended. “Use an online retirement calculator and continuously check in with your financial adviser, especially with the current economic turmoil,” says Krajicek. As you get into your 50s and 60s, closer to retirement, your non-retirement savings needs may actually fall. “Your kids may be grown and out of the house, your mortgage and cars may be paid off and your income should rise over time,” says Rossman. In terms of things that might vary by age, certain major expenses and life goals will come on and off the list. “Young adults may be especially burdened paying down student loans, for instance, but once those are paid off, that could represent a savings opportunity,” says Rossman.
- How to think about savings in your 60s
If you’re not comfortable with your financial picture, evaluate your income, investments and spending habits so you can make changes. “If you’re feeling secure, you may be thinking about the legacy you’ll be leaving. Start to plan with the people and causes you care about and ensure you’re protecting your wealth with a solid estate plan,” says Krajicek.
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