Having a savings plan is essential to fulfill a short-term goal and ensure you have an emergency fund for unexpected expenses.
Besides that, it can help you or your kids with your future needs, such as for a college fund, business capital, or to achieve a more comfortable retirement plan.
It’s not easy to accomplish the savings goals with all the factors, including household expenses, credit card debt, other essential needs, discretionary spending, or your current salary level.
However, if you want to achieve security for you or your children’s future, you have to be wise about your current and future lifestyle.
You need to start saving early and know how much you should be saving.
This article will discuss how much your current savings should be at your age and how you can fulfill your long-term financial goal.
Average Savings By Age
If you can provide yourself or your family the money you need for your living expenses using your household income, then that sounds like a good life.
However, even if things are going well, that won’t guarantee a healthy financial life if you don’t start securing your future.
You might have a stable income for your essential expenses, but you won’t always work for the rest of your life.
Plus, there might be unexpected expenses you have to pay for someday. So, you need to have an emergency savings fund and retirement savings goal.
Below, I will give you financial advice about how much your savings should be based on the usual “rules of thumb.”
20’s
People in their 20’s are usually starters in their chosen career path.
Most of them have a low starting salary which might just be enough for their monthly expenses.
Thus, if you are in this age group, you are not expected to have that large amount of savings account balance for your retirement goal or other future expenses.
However, you need to start saving about 15% of your annual salary.
If you think you can’t achieve that savings balance because of a low monthly income, that’s okay as long as you learn to create wise spending habits.
Just focus on saving as much as you can, as the 15% goal is just a guide.
30’s
Individuals with 30 to 39 years of age tend to have a higher salary for additional retirement savings than their younger days.
If you are in this age group, the average retirement savings goal you should have achieved by now is 1x your annual salary.
Of course, you have the freedom to choose how much you want to save.
But if you want to have a better lifestyle in retirement or extra cash for emergencies, you should aim for the common goal, or even higher.
40’s
If you are in your 40’s, the ideal minimum cash savings balance you should have reached is about 3x your current income.
It might be challenging to achieve that by 40’s as people usually start their own family or purchase houses in their 30’s.
Plus, people in their 40’s tend to be parents with kids already going to school, which means more expenses for education.
However, you can still acquire this goal if you consider growing your savings.
50’s
5x your annual income is the standard savings you should have for your retirement funds in this age group.
At this age, it’s ideal that people finally complete their college education loan debts, mortgage, and other loans.
So, you might have fewer expenses than before.
60’s
You are getting close to your retirement age if you are already in your 60’s.
At this age, you should have saved about 7x your income, and you are about to fulfill your goal.
Retirement planning is not that simple.
But if you want to visualize yourself in a promising future, you can still do it even in your 60’s.
How to Start Saving Money
Regardless of what stage of life you are in, you can still start saving money.
Here are some pieces of financial advice that will help you get started:
Create Savings Account
People usually start by creating savings accounts to make a direct deposit of their extra money when saving money.
A regular savings account can work well, especially for personal finance and emergency saving.
But if you are saving for retirement, it would be better to save your income in a separate account.
There are different types of retirement accounts that might work well for you, depending on your qualifications.
Avoid Discretionary Expenses
Avoiding discretionary or non-essential expenses can be challenging. Of course, you have the right to do what makes your life exciting.
So, it’s okay if you buy your wants, especially if you want to reward yourself for your achievements.
However, don’t forget about your long-term goals, as they will also make your life meaningful and stable in the future.
If you avoid unnecessary spending and use them for additional savings instead, all your efforts will pay off when you need funds someday.
Automate Your Savings
If you have the time to go to your bank or make transfers to your savings account, you can make a direct deposit.
But for individuals who have a hectic schedule to manage their retirement plan, automatic saving is available to lessen the efforts needed.
Aside from automated savings, you can also track your total money for different saving goals.
To do that, you can use different financial apps like Acorns or Pocket Guard.
If you are going to use an app, check if it’s legit.
Besides that, you can also do automatic transfers using your checking account.
You have to set it up so you can automatically transfer your money from checking to a savings account.
Save Your Excess Income
Whenever you have extra money from your excess budget or bonus from work, encourage yourself to save it.
You can spend some on what you need or want to buy.
But try to take a percentage of your extra income to put into your savings or retirement account.
Refusing to buy your wants won’t always be easy.
Yet, it can help you make your money more helpful if you choose to think about what’s ahead.
Invest Your Money
The more expensive your current lifestyle is, the more challenging it can be to achieve the ideal savings you should have.
Given the expenses you might have to make, fulfilling your goals for your savings balance by age can be difficult.
Fortunately, there are various ways to grow your money, including investing it.
You can start by creating investment accounts by choosing from different financial companies.
Seek Help of a Financial Advisor
While you can do many things with your own research, the outcome can still be better if you seek the help of a professional financial planner.
An expert will know how to help you manage your finances based on your current spending habits and income by age.
If you plan to invest some of your money, you can also get a great investment strategy from a financial advisor.
It might be a hassle to talk to someone else about your plans.
But if you think you need help to make your financial decisions with confidence, try to consider it.
Conclusion
Wise decision-making and discipline are necessary to maintain a healthy financial life not only for the present but also for the future.
Therefore, you need to be smart about spending your money to have funds for emergencies or retirement.
With the discussed guideline of goals for retirement by age, you’ll have a basis on how much you need to save to secure an excellent financial lifestyle.
Plus, some tips on how you can ensure an effective saving plan.
If you find this article helpful, please don’t forget to share it and leave a comment for your inquiries.
