Where are you at with your savings strategy? Where do you think you should be?
Having an established savings plan is important. But the level of importance varies, not just between individuals but by generations. A report from Nationwide found that Gen Z and Millennials have started saving earlier and more aggressively than Gen X and Boomers did. The reasons behind that vary from opportunity to financial understanding to environmental influences.
While those factors can be diagnosed and studied, the question that they point to is what “types” of savings plans should each generation be focused on. And how much they should be putting into them.
What We Talk About When We Talk About Savings
There was a time when you had essentially two ways to save your money in a bank: a simple savings account and a checking account. Today things are more nuanced. When you are considering a savings plan you have a number of different options to consider including:
- Basic Savings
- Money Market
- Checking
- CDs (Certificate of Deposit)
- 401k
- IRA
There are even “specialty” savings accounts like a 529 Plan (for colleges), Health Savings Account (HSA), and the Christmas Club. While these accounts have specific uses, other accounts can be used for more traditional savings opportunities. But what does that entail? These are the questions that people ask most often in regards to savings.
How much money should you have in savings?
Every person’s savings plan is dictated by their own personal situation. In a best-case scenario you would be saving about 20% of your income each year. What’s important though is that you save what you can.
To do this, many people work with their employer to have a set amount deducted from each paycheck and automatically added into a savings account. (You can also do this in a smaller way with our Transfer the Cents program.)
How much should you have in emergency savings?
An emergency savings account should be separate from your “regular” savings. You should work to have enough money in your emergency account to cover a minimum of three months of your basic bills.
It’s a good idea to review this account once a quarter to make sure it still accurately reflects your budget.
How much should you have in savings by 30?
Again, it’s important to remember that everyone’s savings situation is different, but on average, the U.S. Bureau of Labor Statistics estimates that a 30-year-old should have $60,000 in savings. Looked at another way, it is suggested that by 30 you have half of your annual income set aside in a retirement savings plan.
How much should you have in your savings by 50?
By the time you reach 50-years-old, experts say that you should have 3 ½ to 5 ½ the amount of your pre-retirement income saved up.
Setting a Savings Plan
Some people are on track to meet these benchmarks while others are refining their savings strategy. If you are in this second category and are an older saver, you may want to set aside a little more than suggested in order to “catch up.” You can also work with a local banker to find a savings program that might help you achieve your long-term savings goals.
Is There a Fast-Track to Savings Success?
Short of a rich aunt leaving you a million dollars in her will, there is no shortcut to building a robust savings account. Building your savings takes time, deliberate actions, and steady growth.
Savings accounts are really built through:
- Purposeful habits
- Setting goals
- Monitoring progress
- Making adjustments as needed
So no “silver bullet?”
As you consider the options your bank offers concerning savings, you will find that there are a varying degree of interest rates available. Savings vehicles with higher rates often have specific terms that must be followed including:
- The amount of money needed to open the account
- The length of time the account must remain open
- The access one has for withdrawals
You can also consider investment opportunities like stocks or crypto, but it’s important to remember that those come with some inherent risks.
So, there are higher return savings options, but no silver bullet for quick savings success.
How Much Should You Have in Your Savings?
The answer to the question “how much money should you have in savings” will vary based on each individual's unique situation. To determine what should go into your savings plan, you should reach out to your local banker. They understand where you are financially and will work with you on where you want to be by helping you find the savings vehicles that match your savings goals.
Reach out to your local branch and start saving today!
