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How much money should I keep in my savings account?

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It can be hard to take care of our day-to-day money needs, so it’s no surprise that financial goals often fall by the wayside like laundry coins getting trapped between couch cushions. After all, determining the proper goals to have and the ways to achieve said goals can be overwhelming. The good news is that when it comes to the topic of saving, determining how much money you should keep in your savings account is the easy part — it’s the actual saving that can get difficult!

So, you ask, how much money should I keep in my savings account? The answer will vary, depending on your needs.

How much is enough?

When you’re getting started in your personal finance journey, you may just be embarking on the process of building an emergency fund. Simply put, most experts agree that the desired amount to have in an emergency fund equates to around three to six months’ worth of expenses. Some refer to this fund as a “rainy day” fund – something that can cover occasional expenses as well as enough money to cover you for a few months in case you change jobs, move, take a leave of absence, etc.

Of course, this means that there isn’t some magic number — instead, there is only a number that makes sense for your lifestyle. This is made especially true by the fact that living expenses vary considerably depending on things like geographic location, family size, and also your personal comfort and risk assessment.

After all, while some may feel comfortable with a few months’ worths of savings, others may sleep better at night if they have closer to an entire year accounted for. Again, this is personal.

I've been saving for awhile now, do I have enough?

If you’re a few years into developing your personal finances, chances are that you have had a bit more time to research financial best practices and develop your own financial habits. However, if this is not the case, that’s fine as well! Contrary to popular belief, it’s never too late to start.

That being said, if you’re a thirty-something – experts say that the amount that you should have in your savings account should be equivalent to around half of your salary. So, if you make $50,000 a year by age 30, you should have around $25,000 saved up.

Should is the operative word here. Firstly, when we are talking about savings in this case, it’s mostly referring to retirement savings, which, as you know, are an entirely different beast than rainy-day savings.

What percentage of my pay should go into savings?

This is a question without a one-size-fits-all answer — mostly because the amount of money that you should put into your savings account largely depends on your financial situation.

In general, it would be wise to designate around 20% of your monthly take-home pay as savings. That being said, if you have other financial goals like say, paying down debt, it may make more sense to throw more cash into that area. As long as you’re hitting putting at least 5% of your money in a savings bucket, you are on the right track. We don’t mean physical bucket. Although, if you want to keep your money in an actual bucket, who are we to stop you?

Starting to save? Four helpful tips

It can be hard to save money. Here are some easy habits to develop that will help ensure that you’re on the right track.

1. Research which high-interest savings account to use

When it comes to where to store your hard-earned savings, not all banks are created equal. It would be time well-spent to research the best investment accounts for you and your financial situation. Though everyone is different, it does make sense to keep the following things in mind throughout your search:

  • Is the account FDIC insured? The FDIC, or the Federal Department Insurance Corporation (FDIC), is a federal entity that protects your bank accounts in the case of bank dissolution.
  • Of course, you’ll want to be after a savings account with an advantageous interest rate — but what is a good interest rate, anyway? While many of the big banks may offer you an interest rate as low as 0.01%, you shouldn’t settle for that. The average savings account interest rate is around 0.06%, but it’s okay to shop around until you find a rate of 2% or more. This would be considered high interest.
  • Would I be better off with using robo-advisors? Robo-advisors, or automated investors, have become more popular during recent times as they allow you to use a computer to invest in stocks based on algorithms, meaning that you can see your investments grow without having to be a stock expert. And let’s be real here, who has time these days to be a stock expert?

2. Develop a fair budget and stick to it

That’s right, we said the “b” word. Developing a budget is not most people’s idea of fun, but there’s a reason why you hear financial gurus and saving enthusiasts alike harp on about it. Budgets can help you stay accountable to your financial goals and ensure that your money isn’t going to waste on frivolous purchases when it could be better spent elsewhere. Sorry expensive oat milk latte, you’re going to take a backseat to drab drip coffee for a while.

The great thing about budgets is that there isn’t really a right way to go about creating one. Your budget is completely unique to you and specific things about your life, such as the amount of your monthly debt payments (Hello student loans!) and your preferred spending on the things in life that make you happy, such as online shopping or takeout meals. You can even use pen and paper if that’s your style.

If you prefer something more electronic, though, budgeting apps like Mint and Goodbudget are very popular.

3. Consider if a savings account is really the best place for your cash

Again, this is another consideration that largely depends on your financial goals and personal circumstance. While a high-interest savings account will be the best option for most people, many will opt for different avenues, such as a CD, a money market account, or even short-term bonds. Much of this really depends on how much you plan to save and what your risk comfort level is.

4. Never lose sight of your personal goals

As we touched on before, it can be easy to give up when it feels like your financial goals are nothing but castles in the sky, and if it feels like everyone else in your bubble seems to be doing better.

The best advice that we can offer here is to breathe. A healthy savings account is not something that is built overnight, and it is normal to go through both gains and setbacks. By setting attainable goals and keeping focused on them, you can help yourself avoid discouragement, which can only derail you while you’re on your financial journey.

Savings money is daunting for many people, but knowing more can help fortify your financial safety net. The next time you ask, “how much money should I keep in my savings account”, remember that it all depends on your lifestyle and circumstances.

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