Find Out: How Much Should I Have in Savings?

Dec 23, 2023 By Triston Martin

Introduction

How much should I have in savings? Having a savings account might alleviate stress in the event of an unexpected bill. The ideal amount of money to have stashed away in savings is a subject that some can only answer. Have at least three to six months' worth of living expenses saved up as a minimum. But how much depends on individual preferences and habits. Knowing that you can save such a significant sum of money is encouraging if you've been overwhelmed by the thought of doing so. We'll show you how to pinpoint your ideal savings amount and rapidly increase your nest egg.

Finding Your Target Number

Knowing how much you usually spend on your most critical payments might help you estimate how much you'll need in savings or how much you'll need to cover your costs for three to six months. Your first step should be to examine your most recent financial statements. The rent or mortgage, insurance, loan, other debt payments, groceries, and gas are necessities. Having enough money put away is crucial so you can pay your essential expenditures for a few months without resorting to credit.

Money put away in a savings account is just as acceptable as money spent on a night out in town. Expect to make significant cuts in the event of an emergency. Let's pretend your essential monthly outlays are $3,000 per month. It would help if you saved up at least $9,000, which is three times that amount. At $18,000, which is six months' worth of living expenditures, it's a worthy goal to have some cushion in case of need.

As a rule of thumb, you should have three to six months of living expenses, but you could save more. It may be prudent to save up to a year's worth of living expenses in case you lose your work and don't receive any income for a while. Increase your savings goal to have enough money for treats like going out to eat or seeing a movie occasionally.

Easy Ways to Grow Your Savings Account

There are easy things you can do today to start saving more money if you still need to reach the target amount. A straightforward strategy is to seek methods to save money on non-essentials. Packing a lunch instead of eating out daily is one way to save money if you regularly indulge in eating out for lunch. Alternatively, think about free, locally organized events to do over the weekend.

You may reduce your spending without giving up the things you enjoy most by making simple adjustments. You may get a second job or start a side business if you need more money. Make putting away your savings easier by setting up regular, automatic transfers. These transactions can be scheduled through your bank's website or mobile app; for example, you can have them automatically processed every time you get paid. Doing so will allow you to save money with minimal effort.

How Much Does the Average American Have in Savings?

How much money should I have in savings? How does yours fare when put next to the average American's savings? As of March 2022, the Federal Reserve reports that the personal saving rate in the United States was 6.2%. In monetary terms, what might that imply?

The median consumer balance was $5,300, representing the midpoint of all responses. In the meantime, the Fed estimates that by 2020, the real median household income in the United States will have reached $67,521. That equates to a monthly income of almost $5,627 for the typical family. Let's see how that stacks up against the average transaction account balance, around $5,300. If that's the case, the ordinary family only has enough money for one month's bills.

Another piece of evidence shows how ready or unready the average American is for a financial emergency. According to the Federal Reserve's May 2020 report on the economic well-being of U.S. households, 64% of the population has enough cash or access to other liquid assets to cover a $400 emergency. That is to say; they would utilize money from savings or a credit card and then use the following statement to pay it off.

Conclusion

Now you know how much I should have in savings at 25. Thirty percent of Americans stated they would have trouble coming up with $400 to pay for an unexpected bill, according to statistics from the Federal Reserve's July 2020 Report on the Economic Well-Being of U.S. Households. Although this is better news than the April 2020 forecast, in which 36% predicted hardship, there still needs more room for savings. Even if you only save a small amount each week, you'll be ahead of the game compared to those who still need to start saving.

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