Financial experts have calculated the amount of capital required for each stage of life and recommend saving an amount equal to one annual income by age 30, and increasing it fivefold by age 50.
Savings
The issue of financial independence and building a “safety net” remains one of the most pressing for modern society. While young people are struggling with debt en masse, leading bankers have come up with a universal formula: exactly how much money you need to have in your account depending on your age.
This is reported in a study by Experian analysts and recommendations from Ally Bank experts, published by Unilad.com.
The “Average Check” Trap
According to the latest Survey of Consumer Finances (SCF) data, the real state of people’s accounts differs greatly from “pretty” official statistics. For example, the average savings in the US range from $20,000 to $72,000. However, analysts emphasize that this figure is skewed by ultra-wealthy households.
A more realistic, median amount (the figure for the average person) is only between $5,400 and $8,700.
Generation Z and young millennials are having the hardest time. Experts note that young people are increasingly finding themselves in a situation of “negative wealth” – when the amount of personal debt and loans exceeds the value of all their assets. As Will Snell, head of the Fairness Foundation, states, the lack of financial capital at a young age literally deprives people of resilience against economic crises and harms mental health.
The Golden Standard of Savings: How Much Do You Need?
To avoid being on the brink of poverty in old age, financiers recommend starting to form strong saving habits as early as after 20 years of age. Bankers have developed a clear scale of emergency reserves, measured in the number of your annual salaries:
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By age 30 – your account should have an amount equal to 1 of your annual incomes;
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By age 40 – you need to have accumulated 3 annual salaries;
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By age 50 – the financial cushion should be 5 annual salaries;
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By age 60 – the ideal indicator is 7 annual incomes, kept in the bank.
For comparison, the real statistics of savings by age (using developed countries as an example) look like this:
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By age 35: average savings amount – $20,540;
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Ages 35–44: savings increase to $41,540;
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Ages 45–54: accounts have an average of $71,130;
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Ages 65–74: peak wealth, people have about $100,250.
At the same time, experts summarize: these figures are not a panacea. The final amount of your personal capital should depend on three individual factors: your current earning level, your desired retirement age, and the lifestyle you plan to lead after ceasing active work.
Earlier, we wrote about why the hryvnia is getting more expensive again and what to do with dollars.
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