Once you’re over 25, you must think more about savings, investments, and, importantly, your financial objectives. However, saving for retirement in your 20s can be challenging, especially if your salary is low and you have a student loan. Chances are, you have encountered the question, ‘How much money should I have saved by 25?’
Determining how much money I should have saved by 25 is crucial to planning for financial stability and independence. Establishing a savings benchmark can guide you in achieving financial goals, such as purchasing a home or simply preparing for emergencies. While there is no one-size-fits-all answer, let’s understand the realistic savings targets for this age and strategies to gauge your progress and make informed decisions.
What’s a Realistic Savings Rate at Age 25?
Examine your plan before you proceed with it. A Pew Research Center study found that the median income for young adults aged 22 and 25 is around $38,670. However, one should set aside 15-20% of their annual salary to achieve this.
When you reach 25, you could have saved $20,000 if you’re drawing the average salary for someone your age and putting aside the suggested 15% to 20%. However, many 25-year-olds might need help setting aside 20% of their salaries.
How to Save Money at Age 25
Saving even a fraction of your income at 25 is a good beginning since you can aim to raise it as your earnings increase. Here are some steps aimed at improving your long-term savings rate.
Build Your Emergency Fund First
Young people should focus on creating an emergency fund equaling nearly 3-6 months of your expenditure. This money should be treated as a reserve to be used in an emergency. An adequate emergency fund ensures you’re prepared to handle financial challenges that may arise. Start by setting aside a portion of your monthly income.
Pay Off Credit Cards Before Student Loans
If you have credit card debt, prioritize paying it off before tackling student loans. Credit card debt often carries higher interest rates, making it costly to carry a balance over time. Focusing on paying off credit card debt first can reduce the interest accrued and free up funds for savings and investments.
Start by creating a repayment plan that targets your highest-interest credit card balances while making minimum payments on your student loans. Once your credit card debt is under control, you can allocate more resources toward repaying your student loans.
Budget for Health Insurance
Budgeting for health insurance is critical for financial planning, as you are nearly 25. Allocate a portion of your monthly budget to cover health insurance premiums and anticipated out-of-pocket medical expenses.
Health insurance protects you from the financial burden of unexpected healthcare costs. Consider deductibles, copayments, and coverage limits when selecting a health insurance plan. By budgeting for health insurance, you can ensure access to quality medical care without sacrificing your financial well-being.
Collect Your Employer’s 401(k) Match
Securing your employer’s 401(k) match is a crucial financial strategy. By matching your employer’s 401(k) contribution, you can accelerate the growth of your retirement savings and enhance your long-term financial security.
It allows you to double your retirement savings contributions, helping you build a substantial nest egg for the future. Moreover, take proactive steps to enroll in the plan and maximize your contributions to capitalize on this benefit.
Conclusion
Saving money at 25 is a significant step towards securing your financial future. Focusing on starting to save, even at a modest percentage, can lay the foundation for your financial future. It’s essential to approach saving with a long-term perspective and to adapt strategies as income and financial circumstances evolve. For assistance with managing and budgeting your savings goals, consider using Beem budget planner services to streamline your savings and investment efforts.
Read related article: How to save money while paying mortgage
FAQs
How much money does a normal 25-year-old have?
The amount of money that an average 25-year-old has saved can vary significantly based on individual circumstances. According to the Federal Reserve’s Survey of Consumer Finances, the median savings account balance across households of all ages was $5,300, which provides a benchmark for comparison. However, savings can vary widely based on individual circumstances and financial goals.
What percent of 25-year-olds have $100k saved?
The percentage of 25-year-olds who have $100,000 saved is relatively low. Given the financial challenges many individuals face in their mid-20s, reaching such a substantial amount of savings at this age is a notable achievement. However, achieving this milestone by age 25 requires diligent saving and investment strategies.
What factors should I consider when determining how much to save by 25?
When determining how much to save by age 25, consider your current income, living expenses, debt obligations, long-term financial goals, and risk tolerance. Considering these unique aspects, you can create a personalized savings plan for a secure financial future. It’s essential to balance saving for the future and enjoying your present lifestyle.
