There are lots of reasons—and lots of ways—to save. However, for those looking for a benchmark of just how much they should’ve saved by a specific age, things get tricky. Average savings by age is a tough metric because there are so many variables that go into a number like that.
The Importance of Saving for the Future
Life can happen fast. For example, the average cost of just having a new baby can run anywhere from $5,000 to $14,500, let alone the cost of raising a child for the rest of their life.
And, if that baby wants to get a college degree, you’re looking at a whole new ballpark of savings, as the cost of a college education can run from about $40,000 to well past $100,000.
There’s one other big reason to save for the future: People are living longer. According to a 2019 survey by Aegon Center for Longevity, Transamerica Center for Retirement Studies and Instituto de Longevidade Mongeral Aegon in Brazil, just 36% of American workers are “very confident they will be able to retire comfortably.” Globally, that number is just 29%.
A Savings Shortfall
The number of Americans who would be able to cover an unexpected $1,000 expense has held steady at between only 37% and 41% since 2014, according to Bankrate’s annual surveys.
The Federal Reserve notes that 30% of all Americans don’t have enough cash in savings to cover even a $400 emergency. And Bankrate’s most recent survey shows that nearly one in five Americans have no money saved at all to cover an emergency expense.
Snapshot of the Typical American Household’s Savings
The Fed’s 2019 Survey of Consumer Finances shows that the typical American household has $5,300 in a savings account at a bank or credit union. But, this number varies greatly by age and number of people in a household.
Average Savings for Those 35 and Younger
Americans under the age of 35 had an average savings account balance of $11,200, according to the Fed’s survey .
Because this is such a large age bracket that can skew from teenagers just graduating high school to recent college grads to young professionals well into a decade’s worth of work, it’s tough to nail down age-by-age where the average may be.
It is typically suggested to have three to six months of expenses in an emergency account. At the very least, aiming to have $1,000 handy in a savings account for unexpected expenses is recommended.
Employer-sponsored retirement funds such as an IRA or a 401(k) may be good options for people who are ready to set long-term retirement savings goals.
Minimally, contributing the amount the company will match is a good way to ensure potential future savings, thanks to compound interest. For reference, the average 401k savings for someone between the ages of 20-29 in 2019 was $10,500.
Average Savings by Age: 35 to 44
The 2019 Federal Reserve Survey of Consumer Finances found that Americans between the ages of 35 and 44 had an average savings account balance of $27,900. Those in this age bracket are now well into adulthood. At this stage of life, it’s prudent to save up that three-to six-month savings account, to cover the cost of everything from an accident to a lost job.
Now may also be the time to think about diversifying a financial portfolio and possibly investing in the stock market or in real estate.
Again, for reference on where a person may want to be at for retirement savings goals, the average 401k savings for someone between the ages of 30 and 39 in 2019 was $38,400.
Average Savings by Age: 45 to 54
At this point, common financial advice dictates that a 50-year-old should have at least six times their annual salary if their intention is to retire at 67.
And, by the age of 40 to 49, a person may want to hit the average retirement savings, which sits at $93,400.
Average Savings by Age: 55 to 64
The 2019 Fed survey found that Americans between the ages of 55 and 64 had an average savings account balance of $57,800.
As this is the time when most Americans are staring down retirement in a few years it’s typically a good idea to kick up savings, specifically retirement savings, into high gear.
That’s because while younger people are capped at contributing $19,500 a year to a 401(k) account, those over the age of 50 are allowed to contribute an additional $6,500.This is known as a catch-up contribution.
The average retirement savings account for a person between the ages of 50 and 59 in 2019 was $160,000. It’s important to note that taking out cash before the age of 59 and a half could mean tax penalties.
Average Savings by Age: 65 and Older
This is when savings really peaks for the average American. The 2019 Federal Reserve Survey of Consumer Finances found that Americans between the ages of 65 and 74 had an average savings account balance of $60,400.
However, that savings number does drop over time. According to the survey, Americans above the age of 75 had an average savings account balance of $55,600.
This drop illustrates the importance of creating a retirement budget and sticking to it in an effort to have enough savings for as long as needed.
But, before retirement, try to hit the average retirement savings number of 2019 for those aged 60 to 69, which was $182,100.
Once you reach retirement age, you may be thinking about your life insurance options. SoFi Protect via Ladder offers term life insurance to have a solid plan in place for your loved ones.*
Saving a Little Bit More
Reaching specific savings goals doesn’t have to be complicated. It just means doing a bit of homework, strategizing and staying diligent about personal finances.
The first step in saving more is to analyze current expenses to see what can be cut back on or cut out altogether to make more room for saving. This means creating a monthly personal budget and tracking current personal spending.
To track spending, a person could create an excel spreadsheet and list all expenditures by categories like groceries, phone bill, car expenses, housing, medical, entertainment and others over the course of a month, filling it in with every single dollar spent to see where the money is going.
To make this process a little easier, SoFi offers SoFi Relay, which allows users to connect all their accounts to one mobile dashboard and track spending habits in real time.
After the month is up, the next step is to look back on the expenditures list. Was there anything that surprised you? Going to coffee shops more often than needed? How about that gym membership—did it actually get used? This is the time to get a little ruthless.
After figuring out what’s left, try implementing a general financial outline like the 50/30/20 rule. This means typically 50% of after-tax income goes toward essential expenses like food and rent, while 30% goes toward discretionary expenses like nights out at the movies or concerts. The last 20% belongs to savings and retirement account goals.
Now, it’s time to get creative about saving even more for the future. This can be done by simply direct depositing more cash into a savings or retirement account right from a paycheck. That way, it’s like the cash never existed in the first place.
Those looking to save a few more bucks every month could also do so by getting rid of unnecessary expenses like recurring payments on apps they may not even use anymore. But, instead of pocketing that cash for fun, consider directing that cash right to savings.
Still feeling the pinch and don’t really have room to save more from a budget? Nearly 69% of Americans live paycheck to paycheck and may want to consider finding ways to earn extra income if there’s nothing left to cut from the budget.
Working part-time via an app like Uber, Lyft or Taskrabbit allows people to set their own hours and earn extra income based on how much time they can dedicate to the part-time work. Other options might include freelance work in photography, writing or other creative arts.
Making Your Savings Work Even Harder
There’s one more way to start making more money for your savings account and future, and it takes barely any work at all: Signing up for online investing with SoFi Invest®.
With the account, users can trade stocks and ETFs, trade crypto or even start an automated investing program to make things quicker and easier than going it alone.
And, for those feeling a bit squeamish about diving headfirst into investing, that’s okay. SoFi Invest gives users the option to invest in smaller amounts like buying fractional shares with SoFi Stock Bits, which gives users the ability to buy and sell fractional shares.
And investing a little now can go a long way in saving for tomorrow, next year and your happy retirement to come.
This post first appeared on SoFi and has been republished with permission.
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