Knowing how much money you should have saved by now is a totally grey area that many people feel uncomfortable talking about. Everyone’s financial situation is different, and there are so many factors to consider such as annual income, if you’re a single or two income family, do you have children to support, debts to pay off, or other expenses that keep you from saving as much as you’d like?
But if you’re interested in national averages and what to use as a guideline for how much money you should have saved during each stage of your life, then in this blog post I am going to share with you what my research found to be the most common financial positions that people are in in their 20’s, 30’s and 40’s.
If you’ve not reached the goals that this blog post suggests you should have yet, then don’t worry and don’t feel disheartened – it’s never too late to start saving or investing and there is no need to feel behind. Just use this post for some ideas and start saving today!
This Is How Much Money You Should Have Saved At Your Age
Twenties – 20’s
Many people spend their twenties still in education, finding their feet on the career ladder and beginning to pay back debts that they may have accumulated from student loans, or poor credit card spending decisions. So it’s forgivable if you make it to your mid-late twenties without having saved a lot of money.
In an ideal world, by the time you’re ready to say goodbye to your twenties, you should have paid off most bad debt (credit cards, loans, student fees), have started saving for an emergency fund, and possibly have a few thousand saved for the deposit on your first home.
You should also start saving for retirement now. We’ll get to the figures in more detail later, but if you can, then you should be contributing somewhere between 5%-10% of your annual salary into a retirement fund.
For my UK readers: if you’re aged over 22 but under state pension age, employed by a company and earning more than £10,000 a year, then your employer has to enroll you in a workplace pension by law.
Your employer must then contribute into your pension pot if you’re also paying into it – usually somewhere between 3%-5% of your annual income but check with your employer.
Thirties – 30’s
It’s not until most people reach their thirties that they’re in a position where they can start to put a decent chunk of money away into savings or investments each month.
By this time, you should have an emergency fund under your belt that’s enough to cover 3-6 months worth of expenses should you or your partner not be able to work for any reason, and you should have enough for the down payment on a house.
Once you’ve achieved these two goals, you should think about building up your savings or investment portfolio to a point where it matches the figure of your annual salary (before tax).
Forties – 40’s
By the time you reach your forties, ideally you’ll be settled in a home to suit your family needs, have a fair few years worth of mortgage payments behind you which is increasing the equity you have in your home (which has probably also gone up in value since you bought it), you’d have an emergency fund available that’s around £10,000, plus you’ll have at least the same amount of money as your annual salary in savings or investments (for most people this will be somewhere between £25,000-£30,000).
If you’re able to check all of the above off your list, then you can now start thinking about growing your savings even more – and think about how you’re going to fund your retirement.
Speaking of retirement – assuming you’re earning an average of £30,000 a year since you were 25, you’ve been paying in 5% of you annual salary into a pension pot, and your employer has paid in 3% – by the time you’re 49 years old, you should have a pension pot worth around £60,000.
Ideally, you’ll have invested your pension in a scheme which gives you some sort of return – so if during that time you got a 2% interest rate on your contributions, with the compound interest earned over those 25 years, that’d give you roughly another £15,000, topping up your fund to somewhere around £75,000.
Of course these numbers are just an estimate. You might contribute less into your pension, or, by the time you’re in your 30’s you might be earning a lot more than £30k, or decide to contribute a bigger percentage of your income into your pension as you’re not having to save for other things anymore.
Aside from pensions, if you’ve continued to save and invest your money regularly, then by the time you’re in your late forties, you should have twice your annual income behind you in other savings pots and investments.
To Finish Off…
I really hope you enjoyed this post, and if you’ve been wondering where to start on setting yourself some financial goals, then maybe this has given you a few ideas.
Never feel pressured or like you’ve failed if you’re not in the same financial position as your peers. Every single persons circumstances are different – some people aren’t able to save as much money if they have several children to support, and others might seem like they’re doing really well, but in truth a lot of their wealth might be due to inheritance.
So take the pressure off yourself and instead set yourself some realistic, attainable goals that fit your circumstances.
Make sure to let me know if you’ve got any top tips for saving money for long and short term goals, and check back here soon as I post brand new finance and lifestyle content on The Angelina Archives every single week.