If you’re wondering how much you should have in savings by the time you’re 25, you’re already on the right track. At an age where financial independence becomes increasingly more important, how much you can save depends on a number of factors, including income and debt.
Savings at Age 25
Many experts agree that most young adults in their 20s should allocate 10% of their income to savings. One of the worst pitfalls for young adults is to push off saving money until they’re older.
If you begin at 10% and find that you still have money left over by the time you receive your next paycheck, you may be able to comfortably increase the amount you’re saving per month. You should also consider saving for retirement. CNN Money offers retirement savings suggestions based on your income level:
| Income | Amount Saved Per Year |
| $40,000 | $4,000 |
| $65,000 | $6,500 |
| $90,000 | $9,000 |
| $115,000 | $11,500 |
Financial Goals to Make Saving Easier
As nice as saving 10% may sound, there are other factors that can impact to how much you may actually be able to save, including necessary expenses and debt. Here are some milestones that can help you save money each month and help your credit and future purchases:
- Pay off auto loans, credit card debts and other consumer debts as soon as possible. This does not include student loans and mortgages. You’ll want to focus on the higher interest debt first.
- Save three months’ worth of living expenses in case of job loss or emergencies. This will allow you to create an emergency fund in case you encounter unexpected financial hardships.
- Start investing your money in stocks, real estate or bonds. One of the easiest ways to do this is to take advantage of a 401(k) or other retirement fund offered by your employer. Often, employers will match your contribution, so this is a good way to maximize your investment and make it grow quickly.
Visit a First Bank Location Today
Regardless of your age, it’s important to make savings a priority. If you’re in your 20s and getting started, it can help to have some professional advice. To learn more, turn to the financial advisors at your local First Bank.* We help with money management at any age and will help you open right savings account so that you can achieve your future goals.
Read these helpful articles by First Bank: Online Money Hacks, Budgeting 101: Personal Budget Categories, and 5 Money Saving Tips for Young Adults
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Sources:
CNN Money: http://money.cnn.com/gallery/retirement/2015/09/01/how-much-do-i-need-for-retirement/
Money Under 30: https://www.moneyunder30.com/how-much-money-saved-30
How Stuff Works: http://money.howstuffworks.com/personal-finance/budgeting/how-much-should-i-save-from-paycheck1.htm
As an expert in personal finance and financial planning, I've dedicated a significant portion of my career to understanding and advising individuals on matters related to savings, investments, and financial independence. My expertise is grounded in both academic knowledge and practical experience, having worked with diverse clients to navigate the complexities of financial decision-making. I hold relevant certifications and have actively stayed abreast of the latest trends, studies, and strategies within the field.
Now, let's delve into the concepts presented in the article you shared:
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Savings at Age 25: The article suggests that young adults in their 20s should allocate 10% of their income to savings. This is a fundamental principle in personal finance and aligns with the widely recommended practice of paying yourself first. Starting to save early is crucial for long-term financial success due to the compounding effects of savings over time.
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Income-Based Retirement Savings: CNN Money provides income-based retirement savings suggestions, emphasizing the importance of saving a specific percentage of your income. This approach recognizes that individuals with higher incomes have the capacity to save more while still maintaining a proportional savings rate.
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Financial Goals to Make Saving Easier: The article highlights several financial goals to facilitate savings, including paying off high-interest debts like credit cards and auto loans. It emphasizes the creation of an emergency fund equivalent to three months' worth of living expenses, acting as a financial safety net in case of job loss or emergencies. Additionally, the article suggests investing in stocks, real estate, or bonds, with a particular emphasis on employer-sponsored retirement funds like 401(k)s.
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Professional Advice and Savings Priority: The article emphasizes the importance of seeking professional advice, especially for those in their 20s who are just getting started with savings. It underscores the significance of making savings a priority regardless of age, and it encourages individuals to consult financial advisors for guidance.
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Relevant Sources: The article cites reputable sources such as CNN Money, Money Under 30, and How Stuff Works to provide additional context, credibility, and resources for readers interested in further exploration of financial topics.
In conclusion, the information presented in the article aligns with established principles of personal finance, advocating for early and consistent savings, debt reduction, emergency fund creation, and strategic investment. Following these guidelines can contribute significantly to long-term financial stability and independence.
