How Much Money Should I Have Saved by 25?

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Being 25 years old can be financially tricky. You’re still young, probably without a house or family to look after. But on the other hand, your thirties are right around the corner and you may have some student loans or credit card debt to pay.

Take that and add the current economic climate, crazy inflation, and a high cost of living—especially in big cities like New York and Los Angeles—plus the ongoing climate crisis, and it’s no surprise that many people in their mid-twenties are wondering, “How much money should I have saved by 25? Should I be more prepared for the future?”

If you’re one of them, rest assured that you’re already on the right track. It shows you’re mindful and ready to manage your finances wisely. To help you along, we’ve reached out to finance experts to figure out the ideal savings goal for someone at age 25—plus a few extra financial tips.

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How much money should you have saved by the age of 25?

The question of how much you should have saved by 25 has two answers: the ideal amount and the realistic amount. Since every person’s situation is different, the finance experts we consulted took in consideration variable factors, such as wage and expenses.

20k is the ideal savings amount for a 25 year old

“Ideally, your savings should reach $20,000 by the time you turn 25,” says Bill Ryze, a certified Chartered Financial Consultant (ChFC) and board advisor at Fiona. The national average for Americans between 25 and 30 years of age is $20,540.

According to Ryze, this amount is achievable for young adults save a minimum of 15% of the average annual salary of early 20s workers in the U.S. “The median salary for this age group is around $38,500 per year.” Ryze says. “So if you manage to save 15% to 20% of your income, you’ve made a good start to reach this amount by the time you’re 25.”

Six months of living expense is the realistic answer

Your ability to save money depends on various factors, with employment status, wages, and cost of living being the most significant. Logically, if you earn more, you can save more. For example, a young adult living with their parents spends less on rent and utilities compared to those in the same age group living independently.

So what’s the realistic answer? Aim to save three to six months of living expenses. “This provides a solid financial cushion that can cover unforeseen expenses or job loss. It’s also a foundation that can help in managing larger financial goals in the future,” says Darian Shimy, founder and CEO of the fundraising company FutureFund.

Read this next: 5 Financial Goals Every 20-something Should Have

How much should a 25 year old have in a 401k?

Simply put, a 401k is your employer-sponsored and tax-advantaged retirement plan. Typically, you decide how much money to contribute to your 401k, and your company may match it, depending on their policy.

Since everyone’s circumstances and employment benefits vary, there’s no one-size-fits-all contribution amount. The important thing is to start contributing as soon as you can, Shimy says. “By the age of 25, it’s advisable to have started contributing to a 401K, especially if your employer offers a match.”

If you want to have a target amount, start saving 10% to 15% of your annual income for your retirement account. “A common recommendation is to save at least enough to get the full match since it’s essentially free money,” he says “Aiming to save around 10% to 15% of your annual income, including any employer match, is a robust target that sets you up for long-term financial health.”

Paying off debts, loans, or saving: what to prioritize?

It’s not uncommon for adults in their mid-twenties to have student loans and credit card debts. Combined with living expenses, these bills can take a toll on one’s disposable income and saving plans. To reach your ideal amount of savings by age 25, you should tackle one problem at a time, starting with the credit cards.

“Pay the high-interest debt first,” Ryze says. “Credit card balances with an annual percentage rate of 18% or more can drain your finances. I recommend paying them off first because the interest cost outweighs the potential investment returns.”

Then, focus on your emergency savings. “Building an emergency fund is critical. So, I recommend having at least three months’ worth of your take-home pay in an emergency fund,” he says.

Once you’ve secured your emergency fund, it’s time to start dealing with those student loans. Consider setting up a separate savings account so you don’t get tempted to use that money for other purposes. “It’s crucial not to completely neglect your savings, even as you focus on debt reduction, to protect yourself against unexpected financial issues,” Shimy says.

5 tips on how to save money in your twenties

If there’s one thing we’ve learned from coming-of-age movies, it is that adulting isn’t easy—especially if you’re not an heir or a nepo baby. If you’re concerned about your financial future and savings goals, here are some tips to help you save more money:

1. Set your financial goals

Sometimes people struggle to save money because they don’t really know what they’re saving for. Setting an intention can help motivate you to save for the future and make better investment choices based on your goals.

“I recommend prioritizing goals like saving for a down payment, building an emergency fund, and retiring comfortably,” Ryze says. “Plan your investments according to your needs, expected returns, and time horizon.”

2. Budget your expenses

In personal finances, budgeting is everything. You should have a clear understanding of your income, monthly expenses, and spending habits.

“Budgeting wisely in your 20s, especially in today’s economic climate, involves understanding and prioritizing your expenses,” Shimy says. “Start by categorizing your spending into needs, wants, and savings or debts.”

Your needs should always be your first priority. “For example, rent, groceries, and transportation,” he says. “Then, allocate a portion of your budget to savings, aiming to build that emergency fund and contribute to retirement. Whatever is left can be used for wants, like entertainment and dining out.”

3. Download a budgeting app

There are plenty of budgeting apps available to download. These apps are perfect for young adults who may never have made a budget before. Plus, they often come with preset categories, making it easier to get started—all you need to do is fill in the blanks

Read this next: 7 Best Investment Apps for Beginners in 2024

4. Balance debt and savings

As mentioned earlier, focus on paying off your high-interest debts, like credit card bills, as soon as possible. The less debt you have eating into your income, the more you can save.

Once you’ve gotten rid of this burden and built your emergency fund, you can balance your savings goals with paying other debts. “Coordinating your savings and debt reduction is crucial to building a successful budget,” Ryze says.

5. Find a side hustle if necessary

If you have a hard time saving because you simply don’t make enough money, consider finding a side hustle that fits into your routine. There are many part-time remote-friendly jobs out there, such as transcriber, data entry, and virtual assistant roles. Not exactly what you’re looking for? Find here other 18 ideas on how to make money online for beginners!

Don’t over-pressure yourself

Remember, everyone’s financial situation and background are different, there’s no need to stress about hitting a specific savings target by 25. Focus on being more financially literate and start building your savings early—as soon as possible—with an amount that’s practical for you at the moment. As you advance in your career and your income rises, your savings will naturally grow too.