The standard financial advice is that we should have at least three months’ worth of income in savings for emergencies like job loss, sickness, and sudden expenses like car repair.
Alex Whitehouse, president and CEO of Whitehouse Wealth Management in Vancouver, Washington, said:
“Having cash in a savings account is important because life happens. Companies lay off employees, cars break down and people get sick. Without savings, unexpected spending forces people to take on debt, frequently using credit cards. At 16% or more interest, credit cards become a very costly way to handle sudden expenses.”
According to the U.S. Census, the median U.S. household income in 2016 was was $59,039 or a monthly income of $4,919. That means the average American household should have at least $14,000 in savings.
For the past two years, GOBankingRates has surveyed Americans to find out how much we have in savings.
Cameron Huddleston reports for GOBankingRates, Sept. 12, 2017, that this year, GOBankingRates asked more than 8,000 Americans the same question as in years past:
“How much money do you have saved in your savings account?”
Respondents were asked to choose one of the following answers:
- Less than $1,000
- $10,000 or more
The results of the survey are nothing less than alarming:
- 39%, i.e., nearly 4 out of every 10 Americans, said they have $0 in savings. That’s an increase of 5% from last year’s 34%.
- 57% or more than half of Americans said they have less than $1,000 in savings, which is an improvement from last year’s 69%.
- 12% said they have $1,000 to $4,999 in savings, which is slightly better than last year’s 11%.
- Only 6% said they have $5,000 to $9,999 in savings, which is better than last year’s 4%.
- 25% said they have more than $10,000 in savings, which is much better than last year’s 15%.
In other words, as compared to last year’s survey results, Americans increasingly are bifurcated: the number of savers with more than $10,000 in savings has increased from 15% to 25%, but the number of those with literally NOTHING in savings has also increased, from 34% to 39%.
As one would expect, how much savings one has is somewhat correlated with age:
- Millennials (ages 18 to 34) are more likely than other generations to have nothing saved. In 2017, 46% of millennials have nothing in savings — 15% more than last year’s 31%.
- Among baby boomers (ages 55 to 64), one-third (33%) have nothing saved, just like last year. But the percentage with more than $10,000 in savings has increased from last year’s 17% to 32%.
- Seniors (ages 65 and older) have the highest percentage of all age groups with more than $10,000 in savings — 39% (last year was 23%). However, almost as many (32%) have $0 in savings.
How much should you have tucked away?
- In your 20s: Aim to save 25% of your overall gross pay, including retirement account contributions, matching funds from your company, cash savings or money you have invested elsewhere, like in index funds or with robo-advisers.
- By age 30: Have the equivalent of your annual salary saved. So, if you earn $50,000 a year, aim to have $50,000 in savings when you hit 30.
- By age 35: Have twice your annual salary saved.
- By age 40: Have three times your annual salary saved.
- By age 45: Have four times your annual salary saved.
- By age 50: Have five times your annual salary saved.
- By age 55: Have six times your annual salary saved.
- By age 60: Have seven times your annual salary saved.
- By age 65: Have eight times your annual salary saved.
Fidelity Investments says a good rule of thumb is to have the equivalent of your salary saved by age 30 and to have 10 times your final salary in savings if you want to retire by age 67.