If you're in a position to save some of your earnings, there's a chance you've deliberated the question of whether you're saving sufficient funds compared to others of the same age. The answer to whether you're outpacing or trailing behind the average American savings rate can be varied.
Several determinants affect your capability to save, encompassing factors such as age, financial standing, and aspirations. As expected, the older the individual, the higher the probability of having more money squirrelled away. Data from the Federal Reserve's latest Survey of Consumer Finances indicates that in 2022, bank account median amounts range from $5,400 for sub-35s to $13,400 for those between ages 65-74.
However, youth isn't necessarily a disadvantage. With fewer workforce years and potential education or family-related costs, the under 35 demographic is the only group to have continually augmented its median bank account balances at three-year intervals during the past decade.
In comparison to bank account amounts, savers under 35 also have these assets. The $5,400 in the bank combines with these amounts to total $39,200. This age group also has a median retirement account balance of $18,880.
Chloé Moore, CFP and founder of Financial Staples, stresses the importance of not benchmarking oneself against others, instead advocating for individual goal setting and striving to reach these objectives.
The first step towards accomplishing a savings goal is to create one. Understanding your current spending patterns, tracking income and expenses, perhaps with the assistance of a financial advisor, can make a significant difference.
Moore generally advises saving a minimum of six months of net pay as an emergency fund. She also suggests measures to enhance saving patterns, such as opting for high-yield savings accounts and CDs that can help your money earn while you save.
However, one needs to consider multiple factors before choosing these options and, if possible, use a combination of both to balance accessibility and growth. By being mindful of your spending, setting reasonable and well-planned savings goals, and maximizing your savings through the right accounts, you can ensure you increase your savings and financial stability.