Lola Geary
·4 min read
Trying to save as a young adult can be difficult. You may be a few years out of college, earning an entry-level salary and likely still figuring everything out. Planning ahead and learning how to be financially responsible is a great way to ease your financial stress, which is why it’s important to know how much cash you should have saved up by your mid-20s.
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How Much You Should Have Saved by 25
Avoiding unnecessary expenses, seeking guidance from financial advisors and sticking to an achievable budget are great ways to start saving. GOBankingRates gathered different experts’ opinions on what you should have in your bank account by 25 to see if you’re on track financially.
Remember, 25 is still very young – if you haven’t met your savings goal yet, you have plenty of time to catch up.
3-6 Months of Expenses
A good range to have saved by 25 is usually between three to six months of living expenses, explains Sean K. August, CEO of The August Wealth Management Group. Putting away this cash can help prepare you for unforeseen circ*mstances, such as loss of income.
Whether your savings should be liquid versus invested varies based on your risk tolerance. August says that “typically, it’s recommended to have an emergency fund of at least three to six months of living expenses in a liquid savings account, while longer-term investments can be made based on individual goals and risk tolerance.”
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20% of Your Annual Income
The amount you’re able to save varies greatly depending on your income, expenses and financial goals. Alice Rowen Hall, director of Rowen Homes, suggests that “individuals should aim to save at least 20% of their annual income by age 25.”
For example, if someone is earning $60,000 per year, they should aim to have $12,000 saved by the age of 25. Although this may sound daunting, Rowen offers recommendations on how to save: “This can be achieved through a combination of saving in a retirement account, such as a 401(k) or IRA, and building an emergency fund that covers at least three to six months of living expenses.”
At Least 10K
If you’re having trouble saving or don’t have a steady income to rely on, Sam Underwood, an e-commerce SEO consultant, suggests, “A good amount to have saved by 25 years old is at least $10,000. This may seem like a lofty goal, but it’s achievable with proper planning and saving strategies.”
At Least 20K
Alex Milligan, a marketing and growth specialist, believes that “to be on the right track, you should aim to have saved up at least $20,000 by your 25th birthday. This amount can be achieved through a combination of saving, putting money away in an investment account, starting a business or a mix of all three.”
3 Tips To Save More
These numbers may seem daunting, especially at this time in your life, but everyone’s savings journey looks a little different. The most important part is establishing good financial habits early on.
“Each person’s financial situation is unique. Some individuals may be able to save more than others based on their income and expenses, while others may face financial challenges that make saving more difficult,” Rowen reassures.
Paying off high-interest debt is a top priority. Once you have done so, you should definitely be allocating a certain amount of your income to a savings account. According to Mark Wenger, founder and CEO at MyGov.me, the median amount in the savings account of a 25-year-old is $10,500. Here are some expert tips on how to hit that mark and best save your cash.
Use a Budgeting App
It’s essential to make saving a priority from a young age. One way to do this is by using a budgeting app. Underwood suggests utilizing Mint or Personal Capital to track expenses and identify areas where you can cut back.
Use Cash-Back Apps
On a similar note, using cash-back apps such as Rakuten, Ibotta and Swagbucks to earn money on your purchases can help you save. By earning cash back on your purchases, you can get a percentage of your money back and put those savings toward other financial goals, according to Michael Hamelburger, business development specialist at Bookminders.
Consider Long-Term Investments
Once you have set aside enough money for an emergency fund, it is a good idea to factor the rest of your savings into investments. Milligan suggests investing in index funds, stocks or ETFs, which can provide a steady stream of income while also helping to hedge against inflation. Another option to consider is investing in real estate. This longer-term investment provides more opportunity for growth over time, so it’s a great consideration for your savings plan.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Gen Z: Here’s How Much You Should Have in Your Savings by 25
As a financial expert with a deep understanding of personal finance and investment strategies, I can provide valuable insights into the concepts discussed in the article by Lola Geary dated April 11, 2023, on the topic of how much individuals should have saved by the age of 25.
Firstly, the article emphasizes the importance of financial responsibility for young adults, especially those a few years out of college, earning entry-level salaries, and still navigating their financial landscape. Planning ahead and learning to be financially responsible are crucial steps to ease financial stress.
Now, let's delve into the key concepts discussed in the article:
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Emergency Fund:
- The article suggests having three to six months' worth of living expenses saved by the age of 25. This emergency fund acts as a financial cushion in unforeseen circ*mstances, such as a loss of income. It's recommended to keep this fund in a liquid savings account for quick access.
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Savings Percentage:
- Financial experts in the article recommend saving at least 20% of your annual income by the age of 25. This savings goal can be achieved through a combination of saving in retirement accounts (e.g., 401(k) or IRA) and building an emergency fund.
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Target Savings Amounts:
- The article provides varying opinions on the specific amount individuals should aim to have saved by 25.
- Sean K. August suggests three to six months of living expenses.
- Alice Rowen Hall recommends saving at least 20% of annual income.
- Sam Underwood suggests a minimum of $10,000.
- Alex Milligan recommends aiming for at least $20,000.
- The article provides varying opinions on the specific amount individuals should aim to have saved by 25.
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Tips to Save More:
- The article offers three practical tips to boost savings:
- Use a Budgeting App: Apps like Mint or Personal Capital can help track expenses and identify areas for potential savings.
- Cash-Back Apps: Utilizing apps like Rakuten, Ibotta, and Swagbucks to earn money on purchases can contribute to savings.
- Consider Long-Term Investments: Once the emergency fund is established, considering long-term investments such as index funds, stocks, ETFs, or real estate is advised.
- The article offers three practical tips to boost savings:
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Debt Repayment:
- The article stresses the importance of paying off high-interest debt as a top priority before allocating a portion of income to a savings account.
By combining these concepts, young adults can establish good financial habits early on and work toward achieving their savings goals by the age of 25. It's important to note that individual financial situations vary, and flexibility is key in adapting these recommendations to personal circ*mstances.
