How are yours?
- Personal Capital reports that in 2021 their average user had about $ 57,000 in savings.
- It’s a good plan to save about six months’ cost of living for emergencies.
- Consider investing above that amount to potentially earn a higher return.
Many people struggle to save money earlier in their careers. You may have spent your 20s struggling with low-wage jobs and paying off multiple debts. And then you may have spent your 30s making more money, but most of it is spent on a down payment for a home and childcare expenses.
But if you have reached your 40s, you may be in a safer place financially. You will hopefully earn more and spend less on childcare (if your children are in school and do not need full-time care). And you may be able to own or rent a home that you can afford now. And all this could mean that you could save more money in your savings account.
But if your savings account balance is similar to the average for people your age, you may need to assess that number and make sure it is not too high. So if you’re wondering how your cash savings balance compares to that of other 40 people, Personal Capital has an answer.
How much does 40-eat save?
According to 2021 data from Personal Capital, based on their users’ average account balances, the typical cash savings balance among adults in their 40s is $ 56,585. It does not include money in checking accounts or what Personal Capital calls “other” types of cash.
Now at first glance, $ 56,585 looks impressive. And that’s significantly higher than the average $ 35,434 that those in their 30s saved. But that $ 56,585 might be a little also high, believe it or not.
Here’s when investing can make sense
The money you have in savings should be earmarked for emergencies and short-term goals. But if you are saving for long-term goals, such as retirement, you may not want to keep all that cash in the bank. You may want to invest in it for potential additional growth.
Suppose you want to maintain an emergency fund with enough cash to cover six months’ essential living expenses. If you spend $ 6,000 a month, a $ 36,000 savings account balance should suffice.
If your only other big goal is to save for retirement, and you have about $ 56,000 in your savings account, then you may actually have too much cash in it. In that case, you may want to consider transferring some of that money to a brokerage account and investing it for a potentially higher return over the long term.
That said, if you are shy about emergency savings, then it makes sense to try to boost your cash reserves. But otherwise, be careful when keeping your money in an account that will yield only a minimal return on your cash.
Does it make sense to compare yourself to other 40 people?
Yes, at least from a curiosity point of view. But finally, do not worry about what saved other people your age. Rather, make sure you have the right amount of cash in savings to meet your needs. And at the same time, make sure you have not gone overboard on the cash-saving front, because you do not want to stunt your money’s growth and struggle with long-term goals, such as building a nest egg, in the future.
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