Your 20s are your launchpad. Whether you’re starting your career, getting married, or planning what’s next, you may be asking, “How much should I have saved?” The good news: You’re likely not at your peak earning years yet, which can make this the perfect time to take control of your money, build real savings, and use investments to help set up long-term growth.
How Much Money Should a 20-Year-Old Have Saved?
There’s no fixed number a 20-year-old should have saved, but this decade is your opportunity to build a solid financial foundation. Instead of focusing on one magic dollar amount, aim to create habits that can help set you up for long-term stability:
- Build three to six months of living expenses in an emergency fund. This helps give you a financial cushion if you lose a job, face an unexpected car repair, or have medical bills. Start with a smaller goal, like $500 or $1,000, and build from there until you have enough to cover several months of essentials such as rent, groceries, utilities, gas, and insurance.
- Begin contributing to retirement savings, even if you start with a small amount. The earlier you start, the more time your money can have to grow. If your job offers a retirement plan like a 401(k), contribute enough to take advantage of any employer match. If not, opening an IRA and setting up automatic monthly contributions can be a smart way to start building long-term savings.
What’s the Average Savings by Age in Your 20s?
Unlike your 30s and 40s, savings in your 20s can vary widely, so it helps to think in ranges instead of expecting one exact number. In your early 20s, you’re just starting out and may have little or no savings beyond a small emergency fund. By your late 20s, you may have several thousand dollars saved, or you may still be in grad school and working to pay for your education.
Your income can also play a big role in determining how much you can save. You might be earning an entry-level salary, paying student loans, or living in a high-cost area and, thus, saving far less than your friend who has a higher income and lower expenses.
Averages can also be misleading because they mix together people with very different financial circumstances. For example, one person may have a large savings balance from a family gift or inheritance, while another may be doing everything right but still working on building a cushion. That’s why it’s a good idea to think about average savings by age as a reference point and not a hard-and-fast rule.
A more helpful way to measure progress is to ask whether your savings are growing over time. We believe that if you’re building an emergency fund, contributing to retirement, and saving consistently, you are moving in the right direction, even if your balance looks different from someone else’s.
How Much Should I Have in Savings vs. Retirement Accounts?
When breaking things down into savings accounts and retirement accounts, it helps to think about your money in two buckets: short-term savings and long-term retirement contributions. Both matter, but they serve very different purposes, and the right allocation balance depends on your current life stage and expenses.
If you’re not sure which to prioritize, consider building a basic emergency fund first, then increasing your retirement investing. That way, you have a safety net in place before locking more of your money away for the future.
How to Help Build Savings in Your 20s
Growing savings in your 20s is mostly about creating habits that stick. The earlier you set up that simple system, the easier it should become to save consistently without having to think about it every month. Here are a few ways to help create a system that feels manageable:
- Automate savings contributions. Set up an automatic transfer from checking to savings each payday so saving happens before you have a chance to spend the money.
- Start investing early, even with small amounts. You don’t need a large starting balance to begin building long-term wealth. The key is getting started and letting your money grow over time.
- Avoid lifestyle inflation as income increases. When you get a raise or a better job, try to save part of that extra income instead of spending it to buy a newer car or upgrade your apartment.
- Pay down high-interest debt. Credit card balances and other high-interest loans can drain your income fast, so paying them down can free up more money for saving.
- Take advantage of employer retirement matches. If your job offers a match in a 401(k), contribute enough to get the full match whenever possible. That’s basically free money for your future.
- Set short- and long-term financial goals. Having clear targets, like saving for an emergency fund, a car, or retirement, can make it easier to stay focused and track your progress.
Should I Get a Financial Advisor in My 20s?
Getting a financial advisor in your 20s can help pave the way to success throughout your professional life. Consider working with someone who looks at the whole picture and can help you develop a savings, insurance, and investment plan. Going down a financial road with a plan in place can help you find financial confidence, build strong habits, and accumulate wealth as you grow.
Start Building Financial Habits That Last
It’s easy to feel overwhelmed by the cost of living on a starting salary. Instead of focusing on how much the average 20-year-old has saved, enlist ongoing support from a financial advisor, use financial tools, and create achievable goals to set help yourself up on a strong financial footing that will last a lifetime. Find a trusted financial advisor to help you get started.
FAQs
Can I cash out my Social Security in my 20s?
No, you cannot cash out Social Security in your 20s because benefits generally are not payable until at least age 62, with the option to delay them for a higher monthly amount later. Social Security is a monthly retirement benefit, not a savings account you can withdraw from like a 401(k).
What’s a good savings rate in your 20s?
A common target is to save around 20% of your take-home pay, often through the 50/30/20 budget rule, though even a smaller amount is a good start if you are building consistency. The best rate is one you can maintain while also covering essentials and paying down high-interest debt.
What’s the average net worth of a 20-year-old?
The average net worth of a 20-year-old varies widely, but recent reporting puts people in their 20s at about $139,000 on average and just over $6,000 at the median. That gap shows why averages can be misleading, however, since a few high-net-worth people can pull the average far above what most 20-year-olds actually have.
How much should I have in my 401(k) at 20?
There is no set amount you should have at 20, but starting early and contributing regularly matters more than hitting a specific balance.
The opinions contained in this material are those of the author, and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reliable, but Cetera Wealth Services, LLC cannot guarantee or represent that it is accurate or complete.
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