Regardless of how you choose to save or what you’re saving for, everyone agrees you should save some money. Most advice says to save between 15% and 20% of your salary. But everyone’s path to saving will be different, and saving in the early years of your career can be difficult. Here are some guidelines to show you how much you should have saved at various ages.
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Age 30 and younger
This is where there’s the most variance in circumstances. Some people start their career in their teens, others go to college and don’t start until their early 20s, and some people spend additional years getting an advanced degree.
Each case comes with various levels of student loan debt, which can significantly curb savings in the early part of a career.
Regardless, everyone in their 20s should build up a few thousand dollars in savings as soon as possible. A few thousand in the bank can prevent you from going into unnecessary debt from an unexpected expense like a health emergency or your friend’s bachelor party. Just be sure to work to keep that savings balance where you need it to be after you tap those funds.
If your employer offers a 401(k) and a company match, it’s one of the best ways to build wealth. Otherwise, an individual retirement account (IRA) is a good option for retirement savings.
You should aim to have between half and one times your salary saved for retirement by the time you’re 30.
Granted, that’ll be easier for someone who graduates college in four years with a higher than average salary than it would be for a medical doctor who finishes their residency at 29 and is suddenly making $180,000 per year. The former can easily get there, even if saving less than 10% of their income, but the latter should be able to save a higher percentage of their income in the future to catch up.
31 through 40
If you started your career with student loan debt, you should be paying it down to $0 at some point in your 30s, if not earlier. But your 30s may also come with additional expenses like buying a house, getting married, and having kids.
The average home price in the U.S. is more than $285,000, which means you need a minimum of $10,000 for a down payment. Ideally, you’ll have closer to 20%, or $57,000. And if you buy a home, you’ll also want some additional cash on hand for property maintenance you didn’t have to pay for as a renter. So, pad your savings.
The average wedding costs $19,000. While you might get some nice gifts from friends and family, don’t expect to recoup the cost of your special day.
The average family spends $12,000 to $14,000 per year on their children, and newborns are even more expensive. If you don’t have some extra savings for child-related expenses, you may find your financial plan suffering in other aspects.
Depending on your plans, you may want to grow your cash savings significantly in your 30s to pay for those big expenses. Meanwhile, you should be regularly contributing to your retirement savings and investments.
By the time you’re 35, aim to have 1.25 times to two times your salary saved for retirement; and by the time you’re 40 you should have two times to 3.5 times saved.
41 through 50
You’ll enter your peak earning years in your 40s and 50s, and this is your opportunity to supercharge your savings. Most of your big expenses will be behind you, with the possible exception of paying for your children’s college education.
