According to the latest Better Money Habits report from Bank of America, 73% of millennial respondents were saving. So it’s a fact that millennials are doing a better job saving than older generations.
But how much savings is enough savings?
There is no one-size-fits-all answer to the question. A general rule of thumb is to have one time your yearly income saved by age of 30, three times your income saved by 40, and so on.
Now, this is more of a guide than a strict rule because whether or not your savings are enough depends entirely on:
- your income
- your basic expenses
- your planned retirement age
At the age of 30, my recommendation is for you to have enough to cover three to six months’ worth of basic expenses.
To determine how much that is, start by figuring out how much you typically spend on your most important bills. Consider only essential expenses, including rent/mortgage payments, insurance premiums, loans, and other debt payments, groceries, and commute. Your aim should be to have enough savings to keep up with your most vital bills for a couple of months without having to add to your debt. You don’t necessarily have to include contributions to savings or spending on dining out or other entertainment.
It may help to review recent bank and credit card statements.
By this logic, $50,000 in savings seems like you’re on the right track at 30.
In case you also want to start saving for a good-quality, early-age retirement, you might want to set a higher savings target for yourself.
In conclusion, when mapping out your financial future, age could act as your savings compass. Let this check help you visualize what your current savings can look like later on. Lastly, keep in mind that you’re never too young, or too old, to save for the goals that matter most to you.