It’s among the most common questions I get: How much money should I have saved by 30? (Or by 25, 22, etc.)
Of course, it’s always seemed to me to be a silly question, because everybody has unique financial, lifestyle, and career situations. Still, everybody loves benchmarks, so let’s try to find some.
“How much money should you have saved by 30?” is a rather oversimplified question. After all, having $50,000 in a savings account and $100,000 in credit card debt is a much different situation than having zero debt and $500 saved. Looking at savings alone, anybody would rather have $50,000 than $500. But most (smart) people would rather have $500 and no debt than a negative $50,000 net worth.
That said, I think your goal by the age of 30 should be:
- No consumer debt. A mortgage and student loans are OK; but you should pay off credit card debt, auto loans, and other debts.
- Three months worth of living expenses saved. This is your “emergency fund“, and it should be saved in a high yield savings account that’s separate from your checking account.
- Some investments. Here, I think the fact that you’ve started investing is more important than how much you’ve invested. Read about getting started investing or choose from our recommended brokers to open an account.
Again, everybody is different, and age may not be the best milestone to use to compare your finances with your peers. (Still, people do). For example, somebody who spent most of their twenties in graduate or professional school may be just entering the workforce at 30. Somebody who has been working for twelve or eight years straight is obviously in a better position to have money stashed away by their 30th birthday.
When it comes to savings, the only absolute numbers you should focus on are specific savings goals (e.g. for a down payment, a new car, or a vacation) and your emergency fund. After that, simply save the biggest percentage of your income as you can muster, putting money first into retirement accounts like a 401(k) and Roth IRA.
Then, what you do with your money is your decision. You can, for example, decide for yourself whether to invest and save more or pay down your student loans early.
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