How Much Money to Save Each Month (Age-Based Savings Guide)

It’s no secret Americans are struggling with inflation and stagnating salaries. Feeling like you are falling behind?

Guess what?

You’re not alone.

According to a 2023 survey, 49% of adults had less or no savings than the previous year. Other data shows how tight American wallets are. Another study found that the average American saved 3.4% of their monthly income.

In other words, Americans need help with saving. But making simple changes to your life, like knowing how much money to save each month, can transform your financial picture.

Want to increase your savings? This guide will teach you how to lay the foundations of your future wealth.

Let’s jump right in.

By the Numbers: Average Savings by Age Group

You may hear from many a personal finance writer about running your own race and that “Comparison is the thief of joy.”

Both these things are true, but learning where you stand compared to others in your age bracket can deliver some perspective. In the latest data from the U.S. Federal Reserve’s Survey of Consumer Finances (from 2022), this is where Americans of different ages stand:

• Under Age 35 – $20,540
• Ages 35–44 – $41,540
• Ages 45–54 – $71,130
• Age 55–64 – $72,520
• Ages 65–74 – $100,250
• Ages 75+ – $82,800

If you feel behind, this isn’t uncommon. Approximately 56% of Americans felt they were falling behind on retirement savings. It’s also important to mention these are averages so that outliers can give a wrongful impression of reality.

Let’s examine the median savings from the same survey:

• Under Age 35 – $5,400
• Ages 35–44 – $7,500
• Ages 45–54 – $8,700
• Ages 55–64 – $8,000
• Ages 65–74 – $13,400
• Ages 75+ – $10,000

None of this is good news. It shows most Americans are on the brink. However, developing a strategy and building good savings habits can turn your life around.

Saving Money: The 50/30/20 Rule

Various savings models exist. Some, like the FIRE. (Financial Independence, Retire Early) movement, are hyper-focused on saving as much of their income as possible, whereas others lean more toward enjoying life.

The 50/30/20 rule balances living life and saving a sufficient amount of your post-tax income. U.S. Senator Elizabeth Warren created it for the book All Your Worth: The Ultimate Lifetime Money Plan. So, what does the 50/30/20 rule look like?

Monthly Expenses (50% of Income)

Your needs are the things you absolutely must pay for. Ideally, you should need at most half of your income to cover the bills. These expenses include: 

• Rent/mortgage payments.
• Debt payments.
• Groceries.
• Insurance.
• Utilities. 

If you cannot get this number to 50%, it may be time to make some tough decisions, including moving, reducing your lifestyle expenses, or even taking public transportation—in other words, living within your means.

Wants (30% of Income)

The “wants” section includes optional expenses that can be cut. Examples include:

• Eating out.
• Sporting event tickets.
• Vacations.
• Electronic gadgets.
• Gym memberships.
• Entertainment subscriptions.

Some savers may cut their expenses below 30%, but remember, life is for living, and everyone needs some fun money. If you’re struggling to make your budget work, this is the bucket to cut things from.

Savings and Debt Repayment (20% of Income)

What remains is the money to build your savings fund and pay off any debts. How you allocate these funds between savings and debt is entirely up to you and your financial situation.

Follow this list in order of priority:

• Creating an emergency fund for expenses of at least six months.
• Making IRA contributions.
• Making debt repayments beyond the minimum.
• Investing in the stock market.
• Purchasing physical property.

In other words, you focus on your immediate disaster plan, retirement, becoming debt-free, and then investing to grow your wealth. 

How Much of Your Monthly Income to Save (Based on Your Age)

Looking at other Americans isn’t the ideal benchmark because most people save nowhere near enough. Instead, you need firm guidelines.

Remember, the earlier you start, the less you’ll need to save. So, based on age, how much of your monthly income should you save? To simplify things, we’re assuming you’re starting from zero.

For Your Retirement Savings

• Age 30 – 15%
• Age 35 – 17%
• Age 40 – 21%
• Age 45 – 25%
• Age 50 – 30%
• Age 55+ – More than 33%

How much you need in terms of dollars and cents depends on when you choose to retire. If you choose to retire at 62 (the earliest you can claim Social Security), you’ll need more to compensate for five years of lost income. On the other hand, retire at age 70, and you can get by with less.

For Your Emergency Fund

Your emergency fund should contain six months’ expenses. Some people get by with less, whereas others feel comfortable with more. What’s your number? Multiply your monthly spending by six (or your desired fund period) to get a dollar figure.

Here’s what this might look like based on age:

All emergency funds should be easily accessible, so the best choice is a high-yield savings account with no lock-in periods. Note that these figures are averages, so high-cost states like California and New York have an undue influence on the numbers.

For Life and Savings Goals 

Judging how much you should save for life and savings goals is challenging because we’re all different. The conventional wisdom offered by Fidelity Investments for retirement is this:

• Age 30 – 1x annual salary saved.
• Age 40 – 3x annual salary saved.
• Age 50 – 6x annual salary saved.
• Age 60 – 8x annual salary saved.
• Age 67 – 10x annual salary saved.

Although these figures relate to retirement, they’re also a good goal to aim for general savings. Focus on these numbers (even if they seem huge), and you should be able to buy a house, send your kids to college, and take that dream vacation.

However, the best rule regarding savings amounts is “as much as you possibly can.”

Just remember:

Try not to sacrifice the meaningful things in life to get there. It’s all about balance.

Where to Save Money

Where should you save your money to get the best possible returns? Obviously, your employer-provided 401(k) is one place, but what about accounts firmly under your control? 

Let’s discuss some options.

High-Yield Savings Accounts

High-yield savings accounts enable you to earn interest while keeping your savings somewhat accessible. Generally, these accounts limit monthly transactions and withdrawals to six. However, the interest is much better than that of checking accounts.

High-Yield Checking Accounts

Alternatively, consider high-yield checking accounts. These provide unlimited access to funds while earning interest. They also offer debit cards and allow you to write checks.

High-yield checking accounts work best for short-term savings goals, such as vacation savings. 

Certificates of Deposit (CDs)

CDs are time-limited accounts paying fixed interest rates for a defined period. CDs are great for taking advantage of these rates in this higher-interest environment. However, you will be penalized if you withdraw your funds before maturity. 

You can also build CD ladders, where CDs mature at different times, providing predictable savings access.

Money Market Account

Money market accounts can provide higher yields than standard checking and savings accounts. They also offer debit cards and check-writing features, making them a hybrid of savings and checking accounts.

Note that features offered by money market accounts vary by provider, so not all will meet your goals.

Treasury Bills (T-bills)

Banks provide $250,000 coverage per depositor per account from the FDIC, but T-bills are another option if your savings surpass this amount. The U.S. government covers these short-term debt instruments, making them among the safest places to save money.

Maturities range from a few days up to a year. Although the yields are relatively low, they offer an alternative to banks and credit unions.

How to Save Each Month (Tips for Increasing Your Savings)

Building good savings habits can be challenging if you don’t grow up in a fiscally responsible environment. Approximately 44% of Americans say they couldn’t cover a $1,000 emergency at short notice.

Here are some strategies for increasing your savings rate.

Set Up Automated Payments

Late fees can ruin any budget. If you’re the forgetful type, automate all payments to transfer the money on a set date.

You should also do this with your savings account. Most account providers offer automatic transfers, either online or through an app. Automating your savings and payments reduces the temptation to overspend, ensuring you stay on track. 

Pay Off High-Interest Debt First

Making the minimum repayments on various debts means you may be paying off the interest but not the principal. In the worst-case scenario, you may not cover the interest. For example, the average credit card interest rate today is 27.90% (as of April 15th, 2024).

Interest is the killer, so focus on paying off high-interest debt first, known as the avalanche method. The avalanche method concentrates on attacking high-interest debt first and working through your debt by interest rates.

Alternatively, you may prefer the snowball method of first paying off the smallest debts. This method will cost more in the long run, but it can be motivating to net some quick wins.

Track Your Monthly Expenses

Become someone who knows where every cent is at any moment. Making a budget is one thing, but it’s easy to make costly missteps if you’re not tracking living expenses.

Various budgeting apps help you track your expenses based on your savings goals. This can also be paired with automating payments to your creditors and your savings account. Another option is to use a simple Excel spreadsheet.

Make a Plan – And Stick to It

Your overall plan considers your primary short-term, medium-term, and long-term financial goals. Examples could include:

• Becoming debt-free.
• Saving for a mortgage downpayment.
• Building your emergency fund.
• Putting $10,000 into your retirement accounts.
• Taking a dream vacation.

Whatever it is, you need a roadmap for getting there, and it centers on a budget that’ll get you there. Sit down and think about what’s realistic and what you must do to get there.

Note that your plans will change as you achieve goals and circumstances change, but there should be a good reason to alter your plan.

Change Your Life

Some people scoff at personal finance articles because they believe they cannot make the numbers work. But everyone can save, no matter who they are. If you cannot reach your goals, it may be time to alter aspects of your life, which may include:

• Moving to a lower cost of living area.
• Upskilling to acquire a better-paying job.
• Working on a side hustle.
• Cutting your luxury expenses.

Instant gratification can kill any well-planned budget. Likewise, always standing still can do the same. It’s time to rethink your situation and what you must do to save for your goals.

Take Control of Your Finances With a Personalized Strategy

The problem with personal finance guides is they can only discuss matters from a high level. Everyone’s situation is different, and it’s impossible to write one rule for all with something as complicated as personal finance.

That’s why experts exist to help tailor the tenets of saving to your situation. Take control of your finances with a personalized strategy that helps you check the box next to each of your goals.

To learn more, keep leveling up by reading our blog content, or Get in touch with us for some free advice on taking charge of your financial life.