A good rule of thumb is to have at least one year’s worth of your salary saved by the time you turn 30. As you approach your 30s, you could be close to paying off student loans or have advanced to a higher-paying job. At this stage, it’s natural to start thinking more seriously about your financial future. Whether you’re planning to buy a home, start a family, or simply want to feel more secure, it’s important to have sufficient savings.
But how much should you have saved by age 30? If you’re unsure about whether your savings are on track, don’t worry. This guide will help you understand how much money you should have in your savings account at 30 and how to achieve it, ensuring you know where you need to be for a secure financial future.
How Much Does the Average 30-Year-Old Have in Savings?
If you have more than $20,540 saved at age 30, congratulations! You’re way ahead of your peers. According to the Federal Reserve’s most recent Survey of Consumer Finances, this is the average savings for people younger than 35. Meanwhile, the median savings is $5,400. These numbers highlight that many people in their late 20s and early 30s are still working on building their financial foundation.
How Much To Save by Age 30 According to Financial Experts
While comparing your savings to that of your peers can provide a useful benchmark, financial experts recommend a more specific target. By age 30, you should aim to have saved the equivalent of at least one year’s salary.
For example, if you earn $45,000 annually, you should have $45,000 in savings by 30. This goal ensures you are on track for future financial milestones. Additionally, financial planners like those at T. Rowe Price suggest having 0.5 times your income saved by 30.
Benefits of Having Savings by the Age of 30
Having a solid amount of savings by the time you turn 30 can bring several significant benefits that make your life easier and more secure. Here’s why it’s so important:
- Financial security: Imagine your car breaks down or you suddenly face a medical emergency. With a good amount of savings, you’re better prepared to handle these unexpected expenses without stress. This financial cushion gives you peace of mind, knowing you can cover emergencies.
- Investment opportunities: When you have savings, you can take advantage of investment opportunities that come your way. Whether you want to put a down payment on a house, invest in stocks, or start your own business, having funds available opens up possibilities for financial growth and future wealth.
- Future planning: In your 30s, you might be thinking about getting married, having children, or taking further studies. Having a solid savings foundation makes it easier to pursue these major life goals without needing to rely heavily on loans.
- Retirement preparedness: Starting to save early for retirement can significantly impact your financial future. The earlier you start, the more time your money has to grow through compound interest. This can ensure you have enough to live comfortably when you retire.
Tips for Reaching Your Savings Goal by Age 30
So, how can you reach your savings goal? No matter what your target is, it’s entirely achievable with the right strategies and a bit of discipline. In 2023, 63% of adults in the U.S. who followed a financial plan successfully met or even surpassed their savings goals. Here are some practical steps to help you build a solid financial foundation by the age of 30:
1. Create a budget.
Start by tracking your income and expenses. A budget helps you gain insight into where your money is going and identify areas where you can cut back. The 50/30/20 budget rule is a popular method that suggests allocating 50% of your income to needs, 30% to wants, and 20% to savings.
2. Automate your savings.
Setting up automatic transfers from your checking account to your savings account is a great way to ensure that you save a portion of your income regularly without having to think about it. This allows you to steadily build your savings over time.
To determine how much you should save each month to reach your savings goal, you can use the following formula:
Where:
- Financial Goal: The total amount of money you aim to save (This may be the downpayment for a house, retirement funds, or emergency funds.)
- Current Savings: The amount you have already saved towards this goal.
- Months Until Goal: The time frame you want to achieve your goal.
This formula helps you figure out how much you need to save each month to hit a specific financial goal by a certain date. For instance, if you aim to save $40,000 for when you turn 30 in two years and already have $3,000 set aside, your calculation would be:
This means you would need to save around $1,541 per month to reach your goal of $40,000 by the time you turn 30 in two years.
3. Pay off high-interest debt.
Prioritize paying off high-interest debt, such as credit card balances. These debts can accumulate quickly due to high interest rates, costing you significantly more over time. By focusing on reducing this debt, you can free up more money each month that can be redirected into your savings.
4. Avoid making late payments.
Also, make sure to pay these bills on time. Missing payments can result in late fees, which can diminish your savings. Fortunately, an app like Cushion helps you stay on top of your bills and payments, ensuring you never miss a due date. Cushion also provides real-time updates about any changes to your bills directly in your Google Calendar. This way, you can better plan your spending, save more money, and manage your finances more effectively.
5. Take advantage of employer benefits.
If your employer offers a retirement savings plan, such as a 401(k), make sure to contribute enough to take full advantage of any matching contributions. This is essentially free money for your retirement, boosting your savings without any extra effort on your part.
6. Increase your income.
Look for ways to boost your income, such as taking on a side job, working a few extra hours each week, or picking up freelance projects. Even small additional earnings can significantly impact your savings over time, helping you reach them faster and providing more financial flexibility.
Related article: How to Create a Personal Balance Sheet and Examples
Summary
Reaching your savings goals by age 30 is a significant milestone that can provide financial security, investment opportunities, and peace of mind. While the recommended savings amount can vary based on individual circumstances, aiming to save at least one year’s salary is a good benchmark. Remember, the key is to start early, stay consistent, and make adjustments as needed. By following these tips, you can build a solid foundation for a secure future.
