How much should I have in savings by what age?
Everyone knows they should have a savings pot but exactly how much money should you be putting away and what’s the best amount to have at different ages in your life? When times are tight, savings accounts can be pushed aside but putting a little away, if you’re able to, can make a big difference to your financial future.
The average person in the UK has £9,633.30 in a savings pot, according to financial services provider Raisin.
We look at how savings goals, and financial pressures, can change over time to see just how much you should be saving at any age.
How much in savings should I have by the age of 20?
Your 20s are a decade of freedom, it’s the first time for many people they will live away from their parents and usually be earning real wages at their first job.
While on one hand this means money for fun things like holidays and nights out, you’ll also have to budget for rent, bills, paying back university loans, and if you have any money left - savings.
If you are planning on buying your first home, you’ll want to start saving for it. Average house prices have now risen to £276,759, and first-time buyers often have to put down between 10 and 20%. There are savings products that can help, such as a Lifetime ISA (LISA) which you can save £4,000 into a year and the government will pay £1,000.
Aside from housing costs, an emergency savings pot is key - for any unexpected bills or unforeseen spending.
You may also want to think about your retirement. The sooner you start, even by putting a small amount away, the bigger your savings pot will be when you finish working. Plus, thanks to pension auto enrolment your employer will match or beat your contributions.
Women currently in their 20s are predicted to save around £250,000 by the time they retire, compared to £350,000 for men thanks to the pensions gender gap. Therefore, it’s even more important for them to start saving early.
How much in savings should I have by the age of 30?
Most people have children in their 30s, if they want to, and they bring a lot of extra expenses. Children’s savings accounts, for anyone aged under 18, often have better rates than adult accounts and there are a range to choose from. A junior ISA (JISA), for example, can be opened for a child and as it’s an ISA there are tax benefits too.
Given how high house prices are, you may still be saving towards buying one. If you choose an ISA, just remember every year you get a new allowance. This is £20,000 for the current tax year but after April 5, when the new tax year starts, you’ll no longer be able to use it.
Someone who is able to max out their ISA subscription of £20,000 each year could be a millionaire in 27 years, just in time for retirement, according to research from AJ Bell. If they were able to save £1,000 a month – increasing each year by 2% - they could have a £1 million tax-free pot in 31 years or if they saved £500 a month it would take 42 years.
How much in savings should I have by the age of 40?
Your 40s and 50s are typically when you have most money in savings. When you have children and a mortgage, it becomes even more important to have some emergency savings in case you lose your job. You should aim to have between three and six months in an emergency savings pot. This should be somewhere with easy access, so you can take money out when you need it, and an account paying interest.
Retirement savings should be key in your 40s too. If you have a private pension, you will be given an estimate of how much you will have to live off when you stop working by your provider.
There’s no right or wrong time to invest, but if you have money you’d like to try growing it’s one option. Investing is seen as a long-term option so if you’re investing for your retirement, now is the time to seriously consider it.
The returns are generally higher than with regular savings accounts - at easyMoney you could get a return of up to 8% for example - yet there is an extra risk and no guarantee your money is safe.
How much in savings should I have by the age of 50?
The average person aged 55 and over has £20,028 in savings, according to the research from Raisin. By your 50s, stopping work may be on the horizon in the next 10-20 years.
That means you will want to have saved as much as possible because when you retire your income will drop. It’s important to make sure your money is working as hard as it can, so make a note to regularly review all your savings accounts so you’re getting the best interest rates possible.
Savers plan for an average of £22,500 in retirement, according to research from Canada Life, but the amount you will be looking at will depend on your own circumstances.
If you have investments, it may also be time to start thinking about when you will want to cash them in. If they are in risky assets, and you plan to use the money in the next five to 10 years, it could be time to move them somewhere safer.
You may have other financial commitments too, such as children or grandchildren. If you’re thinking about giving them money from your savings pot - for a first home, for example. There may be inheritance tax implications with any money you give away, but there are legal ways to do this without incurring any tax. You can find more details on the Gov.uk website.
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All the facts and figures presented are accurate at the time of posting.
easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated i n property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.
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https://www.raisin.co.uk/newsroom/savings/better-saving-money/
https://www.theguardian.com/money/2022/feb/07/uk-house-prices-reach-new-record-but-cost-of-living-crisis-threatens-growth
https://www.ftadviser.com/pensions/2021/11/17/young-women-must-save-185k-more-to-match-men-s-pensions/
https://www.ajbell.co.uk/news/four-ways-save-ps1-million-pensions-isasand-even-your-kids https://www.canadalife.co.uk/our-company/news/savers-plan-for-an-ideal-retirement-income-of-22-500/
https://www.gov.uk/inheritance-tax/gifts