How Much You Should Have In Your Savings Account At Every Stage Of Life?

A saving account in a low-interest-earning account in either a bank or other financial institutions. To accumulate money in your savings account, you need to deposit money regularly and discipline yourself from withdrawals. Here we will see How much money should you keep in your standard savings account?

Experts say one should have a savings of at least six months of his/her mandatory expenses like food, shelter, clothing, kids’ schooling, etc. This will shelter you in case you lose your source of income unexpectedly. However, most people feel more comfortable having more than a year’s worth of living expenses. Experts also advise that it is best to have more money in your standard savings account than your 12 months of living expenses to enable you to seize great investment opportunities that may arise.

Setting the Right Target for Your Savings

To set your savings goals, you need a goal and a plan. We can start by setting a goal. Savings goals can be guided by

Want to create an emergency fund
Purposing to have a six-twelve month living budget
Savings for college self or for your kids
Savings for retirement
Saving for investment

Each of these goals requires a different amount of money. You need to be very precise with the amount of money you need to hit your goal and have a clear timeline. For example, you need to create an emergency fund to save.

First things first: what do you consider an emergency? Could it be a job loss, a medical bill, losing a family member, car expenses, etc.? whichever the emergency, estimate how much you wish to set aside to handle that emergency comfortably. Remember, you can’t have all the money in the world to solve all future unseen events, hence keep your targets reasonable. Let’s assume you have scientifically(using your actual hospital bills, factoring in inflation, and your health status) settled on 20,000 dollars as your emergency fund.

The next step is to come up with a plan on how to raise the money. Start with where your income comes from and how much you can put aside toward your emergency fund goal. Experts give different models for growing your savings, including

1. 50%/20%/30% rule -This means you dedicate 50 % of your salary to all your needs, including rent, food, clothes, transportation, etc. The next 20% of your salary is set aside as savings, either for a rainy day, for investment, college fees, etc., and lastly, the remaining 30% is dedicated to your wants; this could be movie tickets, lunch out, etc.

2. 40%/30%/20%/10% Rule- This means 40% of your salary goes to monthly bills, e.g. rent, water bills, electricity bills, etc. 30% goes to short-term self investments eg A trip to China, a one-week vacation, etc. Then, 20% of your salary goes to your finances. And finally, 10% of your salary goes to long-term investment, something you will not touch for a long, long time unless it is a life or death situation.

Financial Institution to Keep your Savings

Where you keep your savings is as important as your savings themselves. So make sure you evaluate the following factors

Accessibility- easy to access your money when you need it.
Returns-never put your savings where it earns nothing. Savings due to their ease of accessibility earn low interest but it is better than nothing.
The risk of losing your money-High interest may attract you, but financially, the higher the interest, the higher the risk. Let your risk appetite be medium and your money will be safe

The following financial institutions have been rated by experts as the best places to keep your savings.

Money markets
Banks savings accounts
Banks fix deposits
Insurance policies

How Much You Should Have In Your Savings Account At Every Stage Of Life?

By age 30: the equivalent of your annual salary saved; if you earn $55,000 per year, by your 30th birthday you should have $55,000 saved. By age 40: three times your income. And by age 50: six times your income. By age 60: eight times your income.

Can I retire at 60 with 500k?

The short answer is yes—$500,000 is sufficient for some retirees. The question is how that will work out. With an income source like Social Security, relatively low spending, and a bit of good luck, this is feasible.

Is $20000 a good amount of savings?

A sum of $20,000 sitting in your savings account could provide months of financial security should you need it. After all, experts recommend building an emergency fund equal to 3-6 months’ worth of expenses. However, saving $20K may seem like a lofty goal, even with a timetable of five years.

What percentage of retirees have a million dollars?

The remaining respondents calculated that they need less than $500,000. But how many people have $1,000,000 in savings for retirement? Well, according to a report by United Income, one out of six retirees have $1 million.

Can a couple retire on 1 million dollars?

“That means your savings would need to last between 14 and 17 years.” The site says that on average when looking at data from the Bureau of Labor Statistics and the average monthly Social Security benefits, having $1 million for retirement could last as long as 29 years, 1 month, and 24 days on paper.

What is the average savings account balance?

According to a NerdWallet survey conducted by The Harris Poll in 2019, the median balance for Americans with savings accounts ages 18-34 was $1,000; for those ages 35-44, it was $2,500; and for ages 45-54, $4,000.

How much money should I keep in savings vs. checking?

Aim to keep about one to two months’ worth of living expenses in your checking account, plus a 30% buffer, and another three to six months’ worth in a savings account, where it can earn greater returns.

Conclusion

Personal financial experts advise that one should have enough savings to cover three to six months’ living expenses, but it never hurts to have up to 12 months or more. These savings can be used for emergencies like job loss and medical bills. for the retirement of future education funds. You will need to set your savings goals precisely and have a plan in place for how you are going to achieve them. Once this part is done, then you need to choose where to put your savings after evaluating various factors like ease of accessibility, return on your savings, and safety of principal amount.

1. How to Increase My Saving Amount every month

There are various ways that you can increase your monthly savings contribution towards your goals, as outlined below.

Get a side hustle like selling stuff online.
Cut down your monthly budget by 1% and save it.
Live below your means. It won’t hurt.
Use coupons to shop for your necessities.
Carry your lunch to work.
Try DIY projects; they can really cut your cost
Buy quality stuff that lasts long rather than poor quality that needs frequent replacement.