Financial experts recommend keeping one to two month's worth of spending dollars in your checking account. They suggest that the rest of your savings be placed in an emergency fund or in a savings account to earn higher interest.
Median and Average Checking Account Balance in the US
Of the Americans who have checking accounts, the median checking account balance is $2,900. On the other hands, the average, or mean, balance is $9,132. The households with much higher incomes seriously skew the numbers when you calculate the mean.
Keeping too much in your checking account could mean missing out on valuable interest and growth. About two months' worth of expenses is the most to keep in a checking account. High-yield savings accounts, CDs, and investment accounts are better for money long-term.
The average American's savings varies by household and demographic. As of 2019, per the U.S. Federal Reserve, the median transaction account balance (checking and savings combined) for the American family was $5,300; the mean (or average) transaction account balance was $41,600.
A sum of $20,000 sitting in your savings account could provide months of financial security should you need it. After all, experts recommend building an emergency fund equal to 3-6 months worth of expenses. However, saving $20K may seem like a lofty goal, even with a timetable of five years.
A general rule of thumb is to have one times your annual income saved by age 30, three times by 40, and so on.
Checking accounts are better for regular transactions such as purchases, bill payments and ATM withdrawals. They typically earn less interest — or none. Savings accounts are better for storing money. Your funds typically earn more interest.
By the time you are 35, you should have at least 4X your annual expenses saved up. Alternatively, you should have at least 4X your annual expenses as your net worth. In other words, if you spend $60,000 a year to live at age 35, you should have at least $240,000 in savings or have at least a $240,000 net worth.
Less Than 35: The average transaction account balance for respondents younger than 35 was $11,250 in 2019, which is the lowest amount among the six age groups.
How much money has the average 30-year-old saved? If you actually have $47,000 saved at age 30, congratulations! You're way ahead of your peers. According to the Federal Reserve's 2019 Survey of Consumer Finances, the median retirement account balance for people younger than 35 is $13,000.
The median checking account balance for U.S. households in 2016 was $3,400, while the average balance was $10,545, according to data from the Federal Reserve Survey of Consumer Finances. The average figure was much higher than the median due to the presence of some extremely high-income households in the survey.
While the median bank account balance is $5,300, according to the latest SCF data, the average — or mean — balance is actually much higher, at $41,600.
By age 25, you should have saved about $20,000. Looking at data from the Bureau of Labor Statistics (BLS) for the first quarter of 2021, the median salaries for full-time workers were as follows: $628 per week, or $32,656 each year for workers ages 20 to 24. $901 per week, or $46,852 per year for workers ages 25 to 34.
By age 25, you should have saved at least 0.5X your annual expenses. The more the better. In other words, if you spend $50,000 a year, you should have about $25,000 in savings. If you spend $100,000 a year, you should have at least $50,000 in savings.
Many experts agree that most young adults in their 20s should allocate 10% of their income to savings. One of the worst pitfalls for young adults is to push off saving money until they're older.
Yes, you can! The average monthly Social Security Income check-in 2021 is $1,543 per person. In the tables below, we'll use an annuity with a lifetime income rider coupled with SSI to give you a better idea of the income you could receive from $500,000 in savings.
Saving 15% of income per year (including any employer contributions) is an appropriate savings level for many people. Having one to one-and-a-half times your income saved for retirement by age 35 is an attainable target for someone who starts saving at age 25.
Another red flag that you have too much cash in your savings account is if you exceed the $250,000 limit set by the Federal Deposit Insurance Corporation (FDIC) — obviously not a concern for the average saver.
Senator Elizabeth Warren popularized the so-called "50/20/30 budget rule" (sometimes labeled "50-30-20") in her book, All Your Worth: The Ultimate Lifetime Money Plan. The basic rule is to divide up after-tax income and allocate it to spend: 50% on needs, 30% on wants, and socking away 20% to savings.
Most Americans have $1,000 to $5,000 in savings
And 35% have $1,000 or less.
For some people, $10,000 could be considered a lot to have saved. Since most experts recommend maintaining 3 to 6 months of emergency savings, if your monthly living expenses sit somewhere between $1,667 and $3,334, then $10,000 should be enough (or more than enough) to cover you.
For most people, $50,000 is more than enough to cover their living expenses for six full months. And since you have the money, I highly recommend you do so. On a different, and equally important note, when you set up an emergency fund, it should be separate from any other savings.
Most financial experts end up suggesting you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000. Personal finance guru Suze Orman advises an eight-month emergency fund because that's about how long it takes the average person to find a job.